How to Read Volume Spikes and Confirm Big Moves in Nepal Market

In the realm of Technical Analysis, volume plays a critical role in confirming the strength and authenticity of price movements. While price tells you what is happening, volume explains why it’s happening — making it one of the most powerful yet underused tools among traders in the Nepal Stock Exchange (NEPSE). Understanding volume spikes — sudden increases in trading activity — helps traders separate false breakouts from genuine institutional moves, giving them an edge in timing entries and exits.

A volume spike occurs when the trading volume on a particular day is significantly higher than the average. This indicates heightened interest and strong participation — often from institutional investors who possess the capital to move markets. The real power of volume lies not in its number but in its relationship to price action. For example, when a large bullish candle forms with a corresponding volume spike, it suggests accumulation and institutional buying, indicating that the move could continue. On the other hand, when a bearish candle appears after a long uptrend with unusually high volume, it often signals distribution — institutions are unloading positions, possibly leading to a reversal.

In contrast, low-volume breakouts — where the price breaks key levels without sufficient volume — are often fake moves or liquidity traps, designed to mislead retail traders. Similarly, climactic volume, where activity reaches extreme highs, may indicate exhaustion, meaning both buyers and sellers have participated fully, and a reversal is imminent.

In NEPSE, especially in sectors like banking, hydropower, insurance, and manufacturing, volume spikes are a reliable clue to institutional presence. When combined with Smart Money Concepts (SMC) such as Order Blocks, Fair Value Gaps (FVG), and Liquidity Zones, volume analysis confirms whether a breakout is real or manipulated. For instance, if NEPSE crosses a resistance level with a strong surge in volume, it validates institutional buying; if it breaks without volume, it’s likely a trap.

According to Sandeep Kumar Chaudhary, Nepal’s foremost Technical Analyst and founder of NepseTrading Elite, “Volume is the heartbeat of the market — price can lie, but volume never does. When you learn to read volume spikes, you start understanding where the smart money is flowing.” With over 15 years of banking and trading experience, and technical training from Singapore and India, he teaches traders to merge Volume Analysis, SMC, ICT, and Price Action to identify and confirm big market moves with institutional accuracy.