A stock's volume refers to the number of shares that are sold, or traded, over a certain period of time (usually daily). A high daily volume is common when stock-specific news items are released or when the market moves significantly, while a low daily volume can occur on light-news days and calm days for the stock market.
What is volume?
Broadly speaking, volume in investing means the total amount of a security that changes hands over a given period of time. This can refer to shares of an individual stock, the number of options contracts traded, or the total number of shares exchanged within an index or an entire stock market. Daily volume is the most commonly used time period, but volumes over longer or shorter periods of time can be useful as well.
It's important to note that when counting volume, each buy/sell transaction is counted only once. In other words, if one investor sells 1,000 shares and another investor buys those 1,000 shares, it will count as volume of 1,000 shares, not 2,000. This may sound obvious, but it's a rather common misconception.
For investors, it's helpful to know that volume 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 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 higher volume across the market.
In addition, technical analysts use a stock's volume in order to determine the best entry and exit points for a trade.
What is volume?
Broadly speaking, volume in investing means the total amount of a security that changes hands over a given period of time. This can refer to shares of an individual stock, the number of options contracts traded, or the total number of shares exchanged within an index or an entire stock market. Daily volume is the most commonly used time period, but volumes over longer or shorter periods of time can be useful as well.
It's important to note that when counting volume, each buy/sell transaction is counted only once. In other words, if one investor sells 1,000 shares and another investor buys those 1,000 shares, it will count as volume of 1,000 shares, not 2,000. This may sound obvious, but it's a rather common misconception.
For investors, it's helpful to know that volume 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 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 higher volume across the market.
In addition, technical analysts use a stock's volume in order to determine the best entry and exit points for a trade.