Volume isn’t just a statistic in the corner of your trading screen—it’s the heartbeat of the share market. For Australian investors in 2025, understanding trading volume is crucial to reading market sentiment, identifying opportunities, and avoiding costly missteps. But what exactly does trading volume tell you, and how should you use it in a volatile, tech-driven market?
What Is Trading Volume—and Why Should You Care?
In simple terms, trading volume is the total number of shares or contracts traded for a specific security during a given period. On the ASX, you’ll see it reported daily for each stock, ETF, and derivative. But volume isn’t just data for data’s sake—it provides key insights:
- Liquidity signals: High volume typically means you can buy or sell quickly without moving the price too much. Thinly traded stocks, by contrast, can be risky and hard to exit.
- Market sentiment: Spikes or slumps in volume can indicate changing investor conviction, fresh news, or a shift in the broader market mood.
- Confirming price moves: Technical analysts often say, “Volume precedes price.” A price breakout with strong volume is more likely to be real than one on light volume.
Volume Trends in 2025: What’s Changing?
Australian trading volumes have evolved with the rise of algorithmic trading, retail investing apps, and global market shocks. In 2025, several trends stand out:
- Higher average daily volumes: According to the ASX’s 2025 market update, daily share trading volume is up 12% year-on-year, driven by increased participation from younger investors and the integration of AI-powered trading tools.
- More volume spikes around news events: With more traders reacting instantly to earnings, RBA announcements, or international events, volume surges are now more frequent—and often more extreme.
- ETFs and derivatives driving volume: Not just individual stocks, but sector ETFs and index futures are seeing record volumes as Australians seek diversified, tactical plays.
For example, in February 2025, trading volumes on lithium miners spiked 40% in a single week following a major policy announcement on EV supply chain incentives. Smart traders who watched volume as well as price were quicker to spot the trend—and profit from it.
How to Use Volume in Your Trading and Investing Decisions
Volume analysis isn’t just for day traders—it’s a valuable tool for anyone buying or selling on the ASX. Here’s how you can harness it:
- Watch for volume confirmation: If a stock breaks out to a new high but volume is weak, it may be a false start. Strong volume on a breakout, however, often signals genuine buying interest.
- Spot reversals: Sudden surges in volume after a long downtrend can indicate capitulation—the point where sellers are exhausted and buyers step in.
- Avoid illiquid traps: Before buying into a lesser-known stock, check its average daily volume. Thinly traded shares can see wild price swings and may be hard to exit in a hurry.
Many Australian brokers now offer advanced volume analytics, including on-chart volume bars, moving averages of volume, and alerts for unusual volume spikes. Use these tools to add an extra layer of insight to your trading decisions.
Volume, Volatility, and Market Psychology
In times of market volatility—such as the recent swings triggered by global inflation data—volume can act as a reality check. Are panic sellers driving the action, or is it just a knee-jerk move by a handful of traders? Volume patterns can help you separate genuine shifts in investor behaviour from mere noise.
For example, when the ASX 200 tumbled 2% after the March 2025 US inflation print, the heaviest trading was concentrated in the first hour, followed by a sharp drop in volume. This indicated a rush of algorithmic trading, not broad-based panic—a nuance that helped savvy investors avoid selling at the bottom.
Key Takeaways for 2025
- Trading volume is a crucial signal of market health, sentiment, and liquidity.
- Volume trends are shifting with technology, policy changes, and global events—so stay alert for spikes and slumps.
- Use volume analysis to confirm price moves, spot reversals, and avoid illiquid traps.
