Volume is measured in share market terminology as the number of shares actively exchanged (bought and sold) throughout the trading session, i.e., within a specific period. The overall turnover of shares is measured by volume.
Now, let us look at what volume means in the share market. In the share market, volume is the number of shares traded in a given period. It is a measure of market activity and can be used to identify trends.
When the volume is high, it indicates a lot of interest in a particular stock or market, and when the volume is low, it indicates less interest. Volume can be affected by several factors, including news events, earnings releases, and analyst ratings.
What is Trading Volume?
The quantity of shares exchanged within a specific period is referred to as trading volume in the stock market. Trading volume is typically calculated over a predetermined time frame.
Trading volume is a measure of market activity and liquidity. When there is a high trading volume, there is a lot of interest in the stock being traded actively. This usually happens when there is news about the company or when there is a significant event affecting the stock. Low trading volume usually indicates that there is not much interest in the stock and is not being traded actively.
If a company’s stock is purchased and sold 200 times in one single trading day, the trading volume for that stock would be 300, even though the exact 200 stocks are being traded in the market.
Trading volume may be calculated for any financial product, including derivatives (futures and options contracts), stocks, bonds, gold, and most commodities. Investors may also learn about the volume of stocks traded on the Sensex or Nifty 50 throughout the trading session.
Where to find Trading Volume?
All stock exchanges track the volume of all equities in the market. As a result, it is easily available in the market, where the investor can discover knowledge on the volume of a certain stock in the share market. Look at exchanges, news websites, and third-party websites that provide stock market information. Investors may also monitor trade volumes through brokers and investing platforms.
A 5-minute price chart, for example, would show volume bars reflecting the overall trading volume for every 5-minute interval. Volume bars are often green or red in color. Green symbolizes net purchasing volume, whereas red denotes net selling volume. Some traders use a moving average to determine whether the volume is comparatively heavy or thin.
Investors can also obtain information and monitor stock volume through investing platforms or personal brokers. Many financial platforms utilize candlestick charts to demonstrate the volume of a specific stock over a specific period.
Various volume charts provide hourly, daily, and monthly volume charts depending on the period. However, the trading volume on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) will be completely different.
Why is Volume Important?
Any stock’s primary goal is to generate volume. It denotes an involvement in the trading activities of the mentioned shares. Heavier volume suggests greater attention, whereas lighter volume shows less interest. Below are a few key reasons volume is so important in the share market.
It is a good indicator of interest in a particular stock. If there is a high stock volume, there are many buyers and sellers interested in the stock, and vice versa. This can give you an idea of which stocks are worth monitoring.
Additionally, volume can help you to identify potential breakouts. If there is a sudden spike in volume, it could be an indication that the stock is about to make a big move. This is why paying attention to volume when you’re day trading, or swing trading is important.
Finally, volume can be used as a confirmation tool. If you see a stock moving in a certain direction and there is high volume, the move is likely genuine, and you can confidently enter a trade.
So, as you can see, volume is very important when trading stocks. Pay attention to it, and you could make some profitable trades.
Trading volume is seen to be advantageous for short-term intraday traders. This application aids investors who employ fundamental research during a trading session.
Trading volume is also useful for those that use fundamental analysis. It might assist investors in substantiating any noteworthy stock fluctuations over an extended period.
Many long-term investors, such as institutional investors such as mutual funds, favor high-volume equities. Intraday traders want equities with large trading volumes since they must square off their positions in a relatively short period.
While volume is significant, before buying into a company, one should consider other criteria as well. A comprehensive choice that considers all elements can assist investors in creating wealth.