Right now, someone is executing a huge trade that will affect the market; however, when you see the volume spike up it allows you to see in real time that someone is actually executing that trade. Many traders look at price charts all day long. They take note of the candles moving up and down, and they draw trend lines on the charts. The difference between an amateur trader and a professional trader consistently profiting from the markets is that a professional trader follows the money flow, rather than the price action. The volume of a trade is how the market communicates. Warren Buffett famously said, "Price is what you pay; value is what you get." What he failed to elucidate on is that volume is an indicator of when "smart money" are placing their bets. Stay with me! By the time you finish reading this article, you will not only know how to interpret volume surging, what they mean in three different market environments and use them to make better, more confident trading decisions. No fluff; no jargon; just the stuff that works.<h1>So What Exactly Is a Volume Surge?</h1>Consider this scenario: You're playing poker with friends in a home game. On most nights, the betting is small - $5 here, $10 there, etc. The betting amounts are calm and the expected result is predictable. Now imagine this: after a few hours of playing like normal, someone pushes $500 into the pot. Now you've got a surge of volume! Now both sides of the table are playing for real money, and the fight over who is right and who is wrong is getting intense. Volume doesn't tell you the direction of the market; it tells you how much energy is behind the move. Your first priority should be to follow the energy associated with the price movement, rather than trying to determine the direction of the movement. As Linda Raschke says in Jack Schwager's *Market Wizards*: "Volume precedes price." That's how she has been able to build her career as a successful trader, and so can you.<h1>The 3 Volume Surge Scenarios You Must Know</h1>Volume surges can vary a lot depending on the surrounding circumstances. There are three very easy ways to break the situation down into these different categories. Scenario 1, when a stock moves up dramatically in price and also has a large volume spike. These surges indicate buyers have strong conviction behind their purchases. Many of these buyers are institutions, hedge funds, and whale traders whose purchase activity alarms the other traders.This situation often occurs immediately after a stock can't break a resistance level. Then it surges through that level with a significant increase in volume, indicating the break is a true breakout instead of just appearing to be one.If you see price break above the resistance level, look for volume to be at 2-3x the average for that particular stock. That's when you should consider that you are able to buy that stock. Scenario 2, when a stock declines dramatically in price and has a significant amount of volume and the price of the stock is declining rapidly. The alarm bells are ringing for traders, and panic sets in as they all try to figure out how to get their money back by selling their stock.However, this is actually the time when most bottoms are formedThe fancy term used for this situation is "capitulation" when all the people who wanted to sell have sold, there are no more weak hands to drive the price lower. The only possible direction from here on out is up.Your move: Don't catch the falling knife. Wait for the volume spike to peak, then watch for price to stabilize. That's your signal. Scenario 3: Price Consolidates + High Volume = Big Developments are on their Way! - This is the least obvious of the three Julies. The price has stayed in a small range like it is not moving at all. It is boring most traders. However, underneath, the volume is huge! There is one person quietly building up their position by purchasing large amounts without raising prices.Remember how the poker player stacks his chips while every player is looking at their phone? When the price breaks out of the range with constructive volume, there will likely be an explosive move!<h1>Volume Is the Lie Detector</h1>The callback from my original promise is the following: volume will show you where the big money is moving.Price alone may not be a true indicator of what is going on. A breakout may appear to be genuine, but it may actually be false. A dip may have been investigated. Conversely, volume is the one metric that reveals the truth — it will validate if the movement is legitimate or if it is simply noise.Each critical level of your chart (support level, resistance level, trend line) becomes relevant only when the volume has confirmed that it is significant.<h1>Your Next Step</h1>Open whatever instrument you have open now or trade. Review the volume. Compare this volume to the last 20 days' volume.Determine if there is a substantial increase in volume today relative to the last 20 days of volume. See if this increased volume corresponds to one of the three scenarios. Based on whether or not the volume corresponds with either a breakout, capitulation or accumulation; you must develop a strategy that correlates to accurately interpret this event. For the next week, watch volume before you watch price. If you do so, you will never trade again in the same way. Now I leave you with one question: When the next surge in volume is received, will you be able to see it, or will you miss it?

Many traders look at price charts all day long. They take note of the candles moving up and down, and they draw trend lines on the charts. The difference between an amateur trader and a professional t

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