Mark G. answered • 01/01/21
Finance Professional, Personal Investor and 5 Yrs Tutoring Experience!
When supply and demand have found their effective equilibrium, which happens every moment throughout the day, this is the market price that has been decided.
Volume on the other hand is the total number of people that are trading shares. The greater the volume, the greater number of shares are being exchanged each day (or any trading period that is being looked at, not necessarily daily but perhaps monthly or even hourly).
A greater volume typically does mean that a price becomes more "real" in the sense that there will be a smaller bid-ask spread and also in the sense that, in an efficient market with a lot of buyers and sellers, there are more people applying the information they have towards one effective true price.
Beyond this though, volume and price are too separate variables.
From a technical analysis perspective, one can look at charts or indicators (stochastics, relative strength index, MACD, etc.) and apply that to the price to gauge momentum, turning points and so on.
One can also do a similar thing to the volume as well. A double top to the volume may indicate that beyond that price, there is lesser interest in trading shares and will lessen once it has moved beyond the prevailing price. Regardless though, these are two separate variables that measure different things and different types of analysis could be applied to either one.
