Trading volume is the total quantity of shares or contracts exchanged during a chosen period (minute, day, week, etc.). It shows how actively a security is traded, helping you judge liquidity, trend strength, and breakout quality. In India, exchanges also publish deliverable quantity and delivery %, which indicate how much of that volume was actually taken into Demat (not squared off intraday). (Investopedia, NSE India)
Why volume matters to Indian investors
- Liquidity: Higher volume usually means tighter spreads and easier entry/exit.
- Conviction: Price moves with rising volume are likelier to sustain than moves on thin volume.
- Risk control: Unusual spikes can signal news, bulk/block deals, or exhaustion near tops/bottoms.
- Execution quality: VWAP and relative-volume filters help institutions and HNIs reduce impact cost. (NSE India)
What exactly counts as “volume”?
Definition: Volume (often shown as Total Traded Quantity) is the sum of all executed trade quantities in the period. If the same 100 shares change hands multiple times, each transaction adds to volume (so two trades of 100 each = 200 in daily volume). This applies to equities, ETFs, futures, and options (measured in contracts for F&O). (Investopedia, Groww)
India-specific terms you will see on NSE/BSE pages:
- Total Traded Quantity (Volume): Count of shares exchanged.
- Deliverable Quantity (DQ): Shares actually taken for delivery to Demat.
- Delivery %: DQ ÷ Total Traded Quantity × 100. The report name is Security-wise Deliverable Positions on NSE. (NSE India)
Volume vs Turnover vs Open Interest (quick table)
| Term | What it measures | Basic formula / unit | Where it’s useful |
|---|---|---|---|
| Volume | Activity level | Sum of trade quantities (shares or contracts) | Liquidity, breakouts, trend strength (Investopedia) |
| Turnover (Value) | Money traded | Σ(Price × Quantity) in ₹ | Market activity in rupees, brokerage STT, value screens (The Economic Times) |
| Deliverable Quantity & % | Non-intraday interest | DQ ÷ Volume × 100 | Investor conviction vs intraday churn in cash market (NSE India) |
| Open Interest (F&O) | Outstanding positions | # of open contracts at end of period | Read with volume to gauge new vs unwound positions |
Core formulas Indian traders use with volume
- Relative Volume (RVOL)
RVOL=Today’s VolumeAverage Volume (e.g., 20 days)\text{RVOL}=\frac{\text{Today’s Volume}}{\text{Average Volume (e.g., 20 days)}}
- >1.5× often signals unusual activity worth investigating.
- Delivery Percentage
Delivery %=Deliverable QuantityTotal Traded Quantity×100\text{Delivery \%}=\frac{\text{Deliverable Quantity}}{\text{Total Traded Quantity}}\times 100
- Used to separate investor buying from intraday churn. (NSE India)
- Turnover (Value Traded)
Turnover=∑(Trade Price×Trade Quantity)\text{Turnover}=\sum (\text{Trade Price}\times \text{Trade Quantity})
- Market-wide or security-wise, reported in rupees. (The Economic Times)
- VWAP (Volume-Weighted Average Price)
VWAP=∑(Price×Volume)∑Volume\text{VWAP}=\frac{\sum (\text{Price}\times \text{Volume})}{\sum \text{Volume}}
- Institutions benchmark execution near VWAP; Indian exchanges reference VWAP in certain mechanisms (e.g., some price band/ref price rules). (NSE India, Avantis CDN Production Storage)
Interpreting volume like a pro
A. Breakouts and trend confirmation
- Price ↑ with Volume ↑: Bullish confirmation; look for RVOL ≥ 1.5× and, ideally, Delivery % rising.
- Price ↑ with Volume flat/↓: Risk of weak breakout or short-covering only.
B. Reversals and exhaustion
- Climactic spike after a long run may signal distribution; check if Delivery % falls (more intraday churn).
- Price ↓ with Volume ↓: Selling pressure could be waning; watch for basing.
C. Liquidity filtering (HNIs/Family Offices)
- Prefer counters with consistently high volume/turnover to contain impact cost during large orders.
D. Cash vs Derivatives
- In F&O, combine Volume + Open Interest:
- Price ↑, OI ↑ = Long build-up (bullish).
- Price ↑, OI ↓ = Short covering (less durable).
Special Indian signals linked to volume
- High Delivery % days: Suggest investor accumulation. Many investors scan for Price ↑ + High Delivery % on NSE “Security-wise Deliverable Positions.” (NSE India)
- Bulk & Block deals:
- Bulk deal: ≥ 0.5% of a company’s listed shares, typically via normal market window—these flows show up in volume and are disclosed by the exchange.
- Block deal: A large pre-negotiated trade in a special window; disclosed separately.
Use exchange archives to verify if a spike was due to such prints. (NSE India Archives, NSE India)
Practical checklist before acting on a volume spike
- Normalize: Check RVOL vs 20-day average; avoid raw volume comparisons across very different floats.
- Cross-verify: Was there news, results, block/bulk deal? See NSE’s archives. (NSE India)
- Look at Delivery %: Rising delivery with price up = stronger signal than intraday-only spikes. (NSE India)
- Time-of-day pattern: Early spikes that sustain through the session are healthier than one-candle bursts.
- Align with structure: Use volume to validate support/resistance breaks, not in isolation.
- Execution: For larger orders, consider VWAP-style execution to minimize impact. (NSE India)
Common mistakes to avoid
- Chasing every spike: Many spikes are one-off prints or news knee-jerks. Always confirm with RVOL + structure + delivery.
- Ignoring free float/promoter holding: Thin floats inflate RVOL easily; liquidity can vanish quickly.
- Comparing unlike-for-unlike: A midcap with ₹25 cr daily turnover can’t be compared to a NIFTY 50 name. Use relative metrics.
- Reading F&O volume without OI: Volume alone doesn’t tell you if positions are new or closed.
Mini caselets (illustrative)
- Breakout + 2× RVOL + Higher Delivery %: Favourable continuation odds; consider pyramiding with risk controls.
- Gap-up on low RVOL + Falling Delivery %: Prone to fade; wait for follow-through.
- Downtrend with declining volume: Selling pressure may be exhausting; look for base + RVOL on up days.
Visual guide (save & share)
Download the Volume Spike Cheat Sheet—bars show volume; line shows price (scaled).
Download the PNG
FAQs
1) Is higher volume always better?
Not always. It improves liquidity, but you still need directional context and delivery. A high-volume doji near resistance can mean absorption, not continuation.
2) What is a “good” volume for a stock?
There is no universal threshold. Use RVOL and rupee turnover relevant to your order size. A HNI order might require ₹50–100 cr daily turnover for low impact; a retail SIP may be fine with far less.
3) Does pre-open trading count toward volume/VWAP?
Exchanges consider relevant trades for VWAP-based reference prices as specified in their rules; refer to current NSE circulars for details. (NSE India, Avantis CDN Production Storage)
4) How do bulk or block deals affect volume?
Bulk deals (≥0.5% of equity) happen in the normal market and add to reported volume; block deals print in a special window and are disclosed separately. Always check the NSE bulk/block deal archives on spike days. (NSE India Archives, NSE India)
Key takeaways
- Volume = activity. Use it to judge liquidity and conviction behind price moves. (Investopedia)
- Delivery % adds colour in India—separates real ownership transfer from intraday churn. (NSE India)
- Combine with VWAP, RVOL, OI (for F&O) and price structure for higher-probability decisions. (NSE India)
Sources & further reading
- Investopedia – definition of trade volume. (Investopedia)
- NSE India – Security-wise price/volume & deliverable positions (definition of Delivery %). (NSE India)
- NSE India – Bulk/Block deal disclosures (use for verifying spikes). (NSE India)
- NSE circulars – VWAP as reference in exchange mechanisms; bulk deal ≥0.5% reference. (NSE India, NSE India Archives, Avantis CDN Production Storage)