Trading Volume Explained: Volume vs Open Interest

Before you read: Support and Resistance Zones: How Traders Mark Levels

What you will learn

• What volume counts, and how it differs from open interest.
• How traders describe volume in context: relative volume, volume at highs and lows, at breakouts, and climactic or drying volume.
• Why volume is useful context but never a complete explanation of why price moved.

What is trading volume?

If one person buys five contracts from another, how much volume traded?

Volume is the number of units that changed hands during a period. For a stock or ETF the unit is a share. For a futures contract the unit is a contract. If one buyer buys 5 contracts from one seller, volume rises by 5, not 10. Every trade has a buyer and a seller, but each contract is counted once, not once for each side.

On a chart, volume is usually drawn as bars under the price candles. Each volume bar matches the candle above it: a 5-minute candle shows the volume traded in those 5 minutes.

Volume tells you how much activity happened. It does not tell you, by itself, who was more eager, buyers or sellers. Every contract bought was also sold. Later lessons on order flow look at ways traders try to estimate which side was more aggressive, and why those estimates are interpretations.

Several examples in this lesson use futures contracts, which are leveraged products. Leverage can cause losses larger than the amount invested.

What is the difference between volume and open interest?

Can a market be very busy while the number of open positions barely changes?

Open interest applies to futures and options. It is the number of contracts that are still open (not closed out, delivered, exercised or expired) at the end of a period, reported once a day by the exchange or its clearing house. At CME Group, for example, preliminary volume and open interest figures appear after the trading day, and final figures, in which open interest can still be adjusted, follow the next morning.

The two numbers answer different questions:

• Volume: how many contracts traded today?
• Open interest: how many contracts are still outstanding?

A trade can raise, lower, or leave open interest unchanged:

• Both sides open new positions: open interest rises by the trade size.
• Both sides close existing positions: open interest falls.
• One side opens and the other closes: open interest is unchanged.

So a busy day can have high volume and almost no change in open interest, if most traders opened and closed positions within the day. Stocks have no open interest; the closest stock concept is shares outstanding, which is a different thing.

How do futures contract months affect volume?

If the same market trades in several months at once, which one is “the” volume?

A futures market lists several contract months (expiration months) at the same time. Equity index futures, for example, commonly list quarterly months. Most trading happens in the nearest active month, called the front month. As expiration approaches, traders move their positions to the next month, which is called the roll.

This matters for volume. Some data sources report total volume across every contract month. Others show only one month. Continuous charts (a chart that stitches contract months together) may switch from one month to the next on a set rule, and the volume on that chart belongs to whichever month is displayed. Comparisons across days are clearer when they use the same month, or when it is clear exactly what the data source is showing. During roll week, volume in the old month falls and volume in the new month rises, which can make a single-month chart look strangely quiet or busy even though overall activity was normal.

What is relative volume?

Is 20,000 contracts a lot? Compared with what?

A raw volume number means little on its own. Is 20,000 contracts in 5 minutes a lot? It depends on the market, the time of day, and the season.

Relative volume compares current volume with a typical level for the same situation. A common way is to compare the volume in this 5-minute bar with the average volume of the same 5-minute slot over the past 20 sessions. A reading of 2.0 means “about twice as active as usual for this time of day”.

Time of day matters because intraday volume has a pattern. Research on US stocks has found that average trading volume differs across the hours of the day (Jain and Joh, 1988), and theoretical work has offered reasons why trading tends to cluster at certain times (Admati and Pfleiderer, 1988). The shape of the pattern varies by market and period. Comparing a midday bar with an opening bar is not a fair comparison, which is why the same-time-of-day version is more informative.

There is no official formula. Different platforms use different lookback lengths and methods, so the same bar can show different relative volume readings on two platforms.

How do traders read volume in context?

What does heavy volume tell you, and what does it leave out?

Practitioners describe several situations. These are descriptions of what people look at, not rules. Volume can also be counted by price instead of by time; that view is the subject of volume profiles.

Volume at highs and lows. When price reaches a new high or low, some traders compare the volume there with the volume on earlier pushes. Heavy volume at a new extreme shows a lot of business was done there. Light volume shows few participants were willing to trade at that price. Neither outcome tells you which way price goes next.

Volume at breakouts. A breakout is a move beyond a prior high, low, or range boundary. Some traders view a breakout on rising volume as showing broad participation, and a breakout on thin volume as showing little interest. Breakouts on heavy volume still fail, and breakouts on light volume still continue.

Climactic volume. Sometimes volume spikes far above normal, for example after a long, fast move. This is called climactic volume. It shows an unusually large transfer of contracts, for example forced selling, stop orders being triggered, or large participants finishing their business. It may come near the end of a move or in the middle of one. You usually only know which afterwards.

Drying volume. Drying (or contracting) volume is a gradual decline in activity, for example during a pullback or a tight range. Some traders read it as a lack of interest in pushing price further in that direction. It can also simply reflect a quiet time of day or a holiday.

Volume around scheduled news. Economic releases can bring sharp, short bursts of volume. A volume spike at, for example, a major US economic release at a scheduled time mostly tells you news arrived, not what participants think of it (see economic events and headlines).

Volume diagram

Illustrative diagram constructed for teaching. Not real market data.

The diagram shows price bars on top, volume bars below. The diagram labels climactic volume after a fast move, a pause on drying volume, and a breakout above the range. It is constructed for teaching and does not show any real market.

What this does not tell you about volume

• Volume does not show direction. Every contract bought was sold.
• Volume does not show intent. A large print could be a new position, a hedge, a roll, or a position being closed.
• “High” and “low” volume are relative. Changing the lookback or the platform changes the reading.
• Futures volume can be split across contract months, so a single-month chart can mislead during the roll.
• Volume patterns described above are context. None of them predicts what price does next.

Check yourself

Reflect on these; there is no score.

1. A futures market trades heavily all day, but open interest barely changes. What might that tell you about how traders used the day? Hint: think about positions opened and closed within the same session.
2. Why can comparing a midday volume bar with the opening bar be misleading? Hint: intraday volume has a time-of-day pattern.
3. You see a volume spike on a single-month futures chart during roll week. What would you check before reading anything into it? Hint: which contract month is displayed, and where the other month’s volume went.
4. A breakout happens on very heavy volume and then reverses. Does that contradict anything in this lesson? Hint: volume describes participation, not outcome.

Last reviewed November 8, 2026. Spotted a mistake? Report an error.