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what is volume?

Tuesday, Feb 5 2019 8:47AM

What is Volume?
In the stock markets, volume is a measure of the total number of shares that are traded in a specific time period.

In other words, it indicates the number of times a particular stock was bought and sold (changed hands). So, if the stock was traded heavily during a particular day, it means the trade volume was high.



On the other hand, a lesser number of trades means that the volume was low.



Let’s take an example to understand about volumes in greater detail.



Imagine there are four traders: A, B, C, D.



Trader A sells 200 shares of stock X



Trader B buys 100 shares of stock X



Trader C buys 500 shares of stock X



Trader D sells 300 shares of stock X



In the above example, the total volume for the transactions of share X is 1,100 shares.

This is a very simple example. In the real world, the number of shares being traded can be in lakhs or even crores.

Trade volumes are reported as frequently as once every hour. These numbers are quite useful for traders who use technical analysis for making trading decisions.



Importance and relevance of volume in trading
Volume can help traders to identify trends in the market. This is because, the stock price and trading volume generally move in the same direction. For example, if the trading volume of a particular stock is increasing, the price, too, goes north.



On the other hand, if the stock price is rising but the volume is decreasing, it could foretell the decline in stock price. This is generally considered to be a good time to sell the stock and book profits.



Price by Volume charts
Volume is also used to identify the movement of a stock price. The movement is between support and resistance levels in the market, until it breaks out (either up or down). After that, a new support and resistance level gets created.



Technical analysts use Price by Volume (PBV) charts to make better understand the movement of stocks in the market. A PBV chart indicates how many shares of a stock are trading at a given price. With the help of this chart, traders try to predict when the stock would encounter support and resistance levels.



This information helps traders to decide when they should buy or sell a particular stock.



Conclusion
Volume is a crucial data element that traders incorporate into their trading decisions.



It can help them to assess the strengths and weakness in a particular stock or even in the market.

What is Volume?
In the stock markets, volume is a measure of the total number of shares that are traded in a specific time period.

In other words, it indicates the number of times a particular stock was bought and sold (changed hands). So, if the stock was traded heavily during a particular day, it means the trade volume was high.



On the other hand, a lesser number of trades means that the volume was low.



Let’s take an example to understand about volumes in greater detail.



Imagine there are four traders: A, B, C, D.



Trader A sells 200 shares of stock X



Trader B buys 100 shares of stock X



Trader C buys 500 shares of stock X



Trader D sells 300 shares of stock X



In the above example, the total volume for the transactions of share X is 1,100 shares.

This is a very simple example. In the real world, the number of shares being traded can be in lakhs or even crores.

Trade volumes are reported as frequently as once every hour. These numbers are quite useful for traders who use technical analysis for making trading decisions.



Importance and relevance of volume in trading
Volume can help traders to identify trends in the market. This is because, the stock price and trading volume generally move in the same direction. For example, if the trading volume of a particular stock is increasing, the price, too, goes north.



On the other hand, if the stock price is rising but the volume is decreasing, it could foretell the decline in stock price. This is generally considered to be a good time to sell the stock and book profits.



Price by Volume charts
Volume is also used to identify the movement of a stock price. The movement is between support and resistance levels in the market, until it breaks out (either up or down). After that, a new support and resistance level gets created.



Technical analysts use Price by Volume (PBV) charts to make better understand the movement of stocks in the market. A PBV chart indicates how many shares of a stock are trading at a given price. With the help of this chart, traders try to predict when the stock would encounter support and resistance levels.



This information helps traders to decide when they should buy or sell a particular stock.



Conclusion
Volume is a crucial data element that traders incorporate into their trading decisions.




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