Volume is one of the most single important indicators in trading. Nothing can happen without it. If it becomes apparent that a company is of interest to the market place, then traders will attempt to buy at the lowest price the sell at the highest price possible under their trading strategies. This activity is directly reflected in the volume of shares traded that day.

When considering volume, you should continually refer to the following guidelines -
Increasing volume reflects increasing investor interest in that company.
Increasing volume that pushes up the price indicates an uptrend.
Steady volume on a share price that is trending up typically means that the trend will continue.
Decreasing volume on an uptrend can signal a potential reversal in the trend.
Increasing volume on a downtrend indicates a downtrend.
Decreasing volume on a downtrend can signal a potential reversal in the trend.

Some examples of these guidelines are -

1. Shows increasing volume with an increasing price. As the supply of shares at lower prices dries up, the buyers have to pay higher prices. This stock is of interest to investors and this is reflected by the significant increase in traded volume.

2. A sideways ranging price action together with static volume. As there is no increasing volume (i.e. no increasing interest), this trend is likely to continue.

3. This is a classic example of a decreasing price with an increasing volume. The demand for this stock has significantly fallen, so sellers have to accept declining prices. As there are a number of sellers entering the market at once, the price rapidly declines.