What is Trading Volume?
Trading volume, sometimes simply referred to as volume, refers to the number of shares or contracts of a security traded during a defined time period. Most commonly, trading volume is measured daily, but depending on the security that is being traded, volume may be measured on longer timelines such as a week or a month. For example, if Investor Bob has purchased 5,000 shares of stock from XYZ Corporation, he has increased XYZ’s volume by 5,000 for the day. If Investor Bob would have sold 5,000 shares of XYZ Corporation, he would have also increased their volume by 5,000 for the day. When investors or financial analysts see a large increase in volume, it may indicate a significant change in the price of security. If trading volume increases significantly four times in a given year, that usually indicates when quarterly earnings statements were released for a company. Significant losses and earnings will generally lead to movement in the trading volume for that stock. When there are anno
Trading volume is the amount of shares traded among parties in a certain period of time. This time is usually a day, but it can be much longer, such as a week or a month. Institutional investors Generally only stocks with large trading volumes will be bought by institutional investors, such as large banks with billions of dollars in assets. They need to be able to buy and sell large amounts of stock quickly at any given time, and they are much more likely to do so with a stock that trades in high volumes. Some private investors feel more secure with these stocks because of all the savvy insitutional investors that have also chosen to purchase and hold the stock. Why is it important? Trading volume is such an important indicator for you because it tells you how significant a price shift is. For example, let’s say there are two stocks that are both worth $10, and they both suddenly gain $4 in one day to become $14. If the volume of stock A was 1,000,000 shares whereas the volume of stock
