http://www.investopedia.com/terms/v/volume-analysis.

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Definition of 'Volume Analysis'

'Volume Analysis' is the examination of the number of shares or contracts of a
security that have been traded in a given time period. Volume analysis is used by
technical analysts as one of many factors that inform their trading decisions. By
analyzing trends in volume in conjunction with price movements, investors can
determine the significance of changes in a security's price. Volume typically
increases as price increases and vice versa; when the opposite occurs, it's called
divergence.

Investopedia explains 'Volume Analysis'

A significant price increase along with a significant volume increase, for example,
could be a credible sign of a trend reversal and could incite an investor to buy or
sell. On the other hand, a significant price increase with low volume might just be
a temporary uptick in an otherwise downward trend. In this case, the investor
may not want to act.

How to use Volume in your trading:

http://www.investopedia.com/articles/technical/02/010702.asp

Volume is a measure of how much of a given financial asset has been traded in a
given period of time. It is a very powerful tool, but it's often overlooked because it
is such a simple indicator. Volume information can be found just about anywhere,
but few traders or investors know how to use it to increase their profits and
minimize risk.

For every buyer there needs to be someone who sold them the shares they
bought, just as there must be a buyer in order for a seller to get rid of his or her
shares. This battle between buyers and sellers for the best price on all different
timeframes creates movement while longer term technical and fundamental
factors play out. Using volume to analyze stocks (or any financial asset ) can
bolster profits and also reduce risk.

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Volume-Based Indicators
Volume-based indicators represent another important group of indicators used in
technical analysis. They help us to spot even very small changes in volume traded
in the market, which often precede a trend reversal. Information yielded by these
indicators is most valuable during the last stages of a trend.

Introduction

The notion "volume" denotes the overall amount of contracts (stocks, currency
lots or futures) that was traded in the market during the given period of time.
Volume can be viewed according to selected timeframe, i.e. we can view the
volume traded for one minute, one hour or one day.

Technical analysts view volume as an indicator, which informs us about the

pressure on change of the price. If volume is high, the pressure to change the
price in direction of the current trend is high, which implies that the trend will
probably remain in effect for some time. On the other hand, when volume is low,
pressure to change the price is low as well, which means that the current trend
will probably end soon.

This theory is based on the premise that higher volume traded in the market
means that more traders are willing to execute their trades at the current prices.
They either believe that current pricing of the contracts is correct or that the
trend will still remain in effect for some time. Conversely, if the volume is low,
there are only few people willing to execute their trades at the current prices,
which means that they either believe that the current pricing of the contract is
inadequate or that the trend is going to reverse soon.

This implies that the volume should be rising and be higher when the price is
moving in the direction of the trend. For example, if there is an upward trend in
the market, then the volume for the days when prices were rising should be
higher than for the days where prices were falling. If this is not the case, a
divergence between volume and price exists. Such a divergence often precedes
the end of the trend.