What it means
Every price change has trading volume behind it, and volume tells you how many people were willing to trade at that price. A rise on heavy volume suggests broad buying interest, while a rise on thin volume may be a weak move that does not last.
Up volume separates the shares traded in advancing stocks from those traded in declining stocks. The most common use is at the level of a whole market or exchange.
Analysts add up the volume of every stock that closed higher on the day to get up volume, and add up the volume of every stock that closed lower to get down volume. Comparing the two shows whether buying or selling dominated.
A related use applies to a single stock. Each trade is classed as an uptick, a downtick or neutral, depending on whether it took place above, below or at the previous price.
Adding the volume of upticks gives the up volume for that stock over the period, and charting it can show whether buyers are gaining control. The measure works best alongside other indicators.
A market that rises while up volume is shrinking may be running out of momentum, while a rise with strong up volume is more convincing. Analysts also look for divergences, where prices make new highs but up volume does not.
Up volume has limits. It does not say who is buying or why, and volume can be inflated by one large trade or by index rebalancing.
It should be treated as one clue among many and not as a prediction. Data sources also differ in how they classify trades.
Some count a rising stock's whole day volume as up volume, while others sort each individual trade, so the same day can produce two different figures. Anyone comparing readings from different providers should confirm which method each one uses.
In practice
Real-world examples.
Example
A market commentator notes that the index rose 1% on a day when up volume was 80% of total volume. She describes the rally as broad, because most trading took place in rising stocks. The next day's moves are more modest.
Example
A trader watches a technology stock climbing through its previous high. He sees that up volume in the stock is twice its down volume over the last hour. He takes this as confirmation that buyers are in control and enters a small position, with a stop-loss order to limit the downside if the move fails.
Example
A portfolio manager sees an index rise to a record while up volume falls for five days in a row. He reads it as a warning that fewer investors are supporting the advance. He reduces the fund's exposure by 5% as a precaution, and he plans to review the position again when volume recovers.
Formula
Calculation
Up volume % = up volume / (up volume + down volume) x 100
Suppose that on one day the shares in rising stocks traded a total of 600,000,000 shares, while shares in falling stocks traded 400,000,000. Total volume = 600,000,000 + 400,000,000 = 1,000,000,000. Up volume % = 600,000,000 / 1,000,000,000 = 60%. The up volume to down volume ratio is 600,000,000 / 400,000,000 = 1.5.Case study
Seen in the real world.
Maple Street Securities is an illustrative, fictional brokerage whose research desk publishes a daily market note. One Thursday the main index rose 0.8%, but the desk's data showed that up volume was only 45% of the total.
The head of research explained that the rise was driven by a handful of large companies while most stocks fell. She advised clients not to read the index gain as a sign of broad strength.
The following week the index slipped back. The illustrative lesson is that price alone can mislead, and the split of volume between rising and falling stocks adds useful context. The desk now includes the up volume percentage in every daily note, next to the index change, so clients can see both figures together.
Watch out
Common mistakes.
- Treating up volume as proof of future gains, when it describes what happened and does not predict what comes next.
- Reading high volume as bullish by itself, when heavy volume on a falling price is a sign of selling.
- Comparing volume across days without noting special events such as index rebalancing or option expiries, which inflate totals.
Questions
People also ask.
How is up volume different from total volume?
Total volume counts all shares traded, while up volume counts only those traded in rising stocks or on upticks.
What is a normal up volume percentage?
There is no single normal level, but readings well above 50% suggest buying dominated and readings well below 50% suggest selling dominated.
Can up volume be used for a single stock?
Yes, by classifying each trade as an uptick or downtick and adding the volume of the upticks over a chosen period.
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