DEFINITION of volume
The volume in trading, it is the amount of a particular asset that is being traded over a certain period of time.
It is often presented alongside price information because it offers extra dimension when examining an asset’s price history.
WHAT IT IS IN ESSENCE
It is used often in shares trading, where it shows the number of shares that are being traded. The number of actual trades made is not given.
So if five buyers buy one share each it seems the same as if one buyer buys five shares.
This amount is important in technical analysis as it helps determine the significance of price movements.
If a price movement is following by a proportionate increase in volume, it is more significant than one that isn’t.
Trading volume is the number of shares traded on that particular day.
It is an indication of general public appetites for some shares. Higher one indicates that there is plenty of buyers. The stock with low one means less interest and thus less liquid.
HOW TO USE
In trading, it is a measure of the total shares that have changed hands for a specific time period. The dollar value of it calculates as trading multiplied by price.
For example, if XYZ has a total trading of 100,000 shares at $5, then the dollar volume is $500,000.
Money managers use dollar volume metrics to determine whether a stock has enough liquidity to support a position.
Dollar volume can also be used to get an idea of money flow when scanning for stocks breaking out or breaking down that are generating the highest value in dollars during the day.
For investors, it’s helpful to know that it generally gets higher when an investment’s price is changing.
Certain events, such as the company’s earnings report or a major news release, can cause the volume to spike and can lead to a large move in either the positive or negative direction.
If the entire market is crashing or rising rapidly, it can also lead to trading spikes across the market.