Volume is a measure of trading activity - how many shares of a given financial asset has traded in a period of time. High trading volume is typically most meaningful when assessed in the context of price. It often means that a rally will continue, or that a sell-off has come to an end and the price is more likely to rise.
Low trading volumes can signal a bottom in price as selling has been exhausted, or that a price rally is running out of steam and a correction could be imminent.
Essentially, the trading volume can help an investor identify momentum, which can help an investor determine their entry and exit points in a position. High momentum = enter, low momentum = exit.
Average trading volume is a good measure to look at prior to getting into a position to understand the liquidity of the asset - you want to avoid investing in illiquid assets, especially if you hope to exit the position soon.
One of the methods of identifying trading volume is by observing a price by volume chart, which is a horizontal histogram plotted on a security’s chart, showing you the volume of shares traded at a specific price level.