When it comes to technical trading, price action and volume are two of the most essential tools traders rely on. Price action shows what the market is doing, while volume gives insight into who is behind the move and how strong that move really is.
By combining both, traders can filter out false signals and improve the accuracy of their trades.
Why Price Action alone isn’t enough
Many price action traders rely heavily on patterns like trendline breaks, pin bars, or chart formations like head and shoulders. While these patterns are helpful, they’re not always reliable on their own.
For example:
- A trendline break may look convincing on the chart, but without volume confirmation, it could easily turn out to be a false breakout.
- A pin bar may suggest a reversal, but without strong volume behind it, the signal can easily fail.
This is where volume becomes critical. It acts as the “lie detector” for price action signals.
Example 1: Trendline Breaks and Volume Confirmation
Let’s say you spot an uptrend line break with a strong bearish candlestick like a marubozu (a long-bodied candle with little to no wick). At first glance, this looks like a clear bearish signal. But is it really?
What you want to check next is volume:
- Is the breakout accompanied by high volume?
- Is sell volume significantly larger than buy volume during the break?
If yes, the breakout is more likely to be real and sustainable.
If volume stays low, it could just be a fake-out, trapping breakout traders.
Example 2: Pin Bars and Volume Confirmation
For swing traders, pin bars are one of the most popular reversal patterns. A bullish pin bar suggests seller failure, while a bearish pin bar signals buyer exhaustion. But again, not all pin bars are created equal.
- Here’s the tip: A reliable pin bar often comes with a volume spike.
Why? Because a pin bar reflects a fierce battle between buyers and sellers, so it makes sense that volume during that candle should stand out compared to previous bars.
If you spot a bullish pin bar with unusually high volume, the reversal signal carries more weight.
If volume remains low during the pin bar, it’s a red flag—better to stay on the sidelines.
The Volume-Price relationship: What Wyckoff taught us
Legendary trader Richard Wyckoff talked extensively about the relationship between price and volume. Here are some key takeaways that still hold true today:
In an uptrend:
If price rises and volume increases, the trend is likely healthy and strong.
If price rises but volume fades, it’s a sign the rally may be losing steam.
In a downtrend:
If price falls and volume increases, the downtrend is gaining strength.
If price falls on low volume, the sell-off might lack conviction.
In short:
Strong moves need strong volume to back them up.
Weak volume = weak conviction.
One common trap: Don’t get fooled by Buying/Selling Climaxes
Before wrapping up, here’s one crucial tip: Many traders get trapped during buying climaxes or selling climaxes.
For example:
- During a buying climax, price surges with massive buy volume.
- On the surface, it looks like strong buying pressure—but in reality, it’s often the final push before a sharp reversal.
Why does this happen?
Because after an extended move up (from the recent swing low), that sudden spike in volume often represents late FOMO buyers jumping in… just as smart money is unloading their positions.
How to avoid the trap:
If price has already traveled a long distance and you suddenly see a large bullish candle with huge volume, step back and ask:
Is this fresh buying? Or is this distribution? Often, it’s the latter.
Final thoughts
Volume and price action are like two sides of the same coin. Price shows you the visible path, but volume tells you the real story behind the move. By learning to read both together, you’ll improve your ability to filter out false signals and trade with more confidence.
Next time you spot a price action setup—look at volume before pulling the trigger.
