Stock Market Volume: Everything You Need to Know

Navigating the stock market involves understanding different metrics of analysis and indicators, one of the vital ones being the stock market volume. 

The volume of stocks refers to the total number of shares traded over a specified period. In simpler terms, it’s like counting how many times a particular toy was bought and sold in a day. The more times it was traded, the higher the volume. It measures the amount of an asset traded in a given period. 

As a trader or investor, understanding stock market volume empowers you. It’s not just a metric, but a tool that can help you gauge liquidity and make informed decisions when combined with other stock market indicators. 

In this blog, we will delve into everything you need to know about stock market volume, its significance, how to use it, and more. 

What is Volume in Share Market?

To make an informed financial decision, you need to understand more than just what the stock market is and how it functions. You must consider several other factors before making a trading or investment decision. One crucial factor is the stock market volume. 

As mentioned above, trading volume represents the total number of shares traded within a time frame. It includes each share that is sold or purchased during the given period. 

For instance, let’s say 100 shares of an ABC company were bought and sold again on the same trading day. In this scenario, the trading volume for the stock becomes 200, even when the same 100 shares are traded. This example demonstrates how the volume is calculated and why it’s important to consider the total number of shares traded, not just the number of transactions. 

In essence, volume refers to the total number of shares/stocks that were actively traded. Further, it is essential to note that the trading volume is high when stocks are traded actively and low when they are not. 

Moreover, trading volume can be measured for any investment instrument: stocks, bonds, futures and options, derivatives, gold, and other commodities. 

Relative Volume Vs Share Trading Volume

Relative volume and share trading volume are related but different concepts. As mentioned above, share market volume refers to the total number of shares traded during a particular period. It provides a quantitative measure of the trading activity in the market.

On the other hand, relative volume compares stocks’ current trading volume to their average trading volume over a given timeframe. It helps you understand whether trading activity is higher or lower than usual.

Where to Find Share Market Volume?

Accessing share market volume data is a breeze. Every stock exchange monitors the stock volume, and you can easily find this information on stock exchange platforms, news websites, and trusted third-party sites. This accessibility should give you confidence in your ability to stay informed. 

In addition, you can also read volume charts like the Positive Volume Index (PVI) or the Negative Volume Index (NVI) to learn about stock/equity market volume analysis. While PVI gives an idea of trading volume when stock prices increase, the NVI tells the same when the stock prices go down.

However, understanding stock exchange volume alone is insufficient for investing decisions. Hence, you should consider other important factors before investing.

For instance, analyzing 52-week low stocks will help you identify value investment opportunities. Similarly, staying updated about pre-open market sessions will give you a fair idea of market conditions for trading decisions. 

What Does Stock Exchange Volume Show?

The stock volumes represent the activities for a particular stock in the said time frame. These actions or activities can be buying or selling of the stock and are often recorded using the volume metric. 

If the stock volume is high, then the interest for that particular stock is very high. If the volume increases with the stock price, it is a sign that investors are showing confidence in the company. Further, if the volume is rising but prices are decreasing, it can be implied that most investors are planning to sell the stock. 

In a nutshell, the stock market volume shows the liquidity and activity of a stock in the market.

Trade Volume Vs Price: Are they Related or Unrelated?

Stock or equity market volume and stock prices are generally interlinked concepts. More people are buying/selling the stock when the trading volume is high. It, in turn, may impact the stock price. 

Higher volumes during an uptrend are considered healthy, while the same during a downtrend can result in a negative trend. 

In simple terms,

• High volume with a price increase suggests intense buying pressure and potentially a continuation of the uptrend.
• High volume with a price decrease suggests intense selling pressure and potentially a continuation of the downtrend.
• Low volume with a price increase might indicate a less convincing uptrend.
• Low volume with a price decrease could signify a weak downtrend or a temporary pullback.
• By combining volume analysis with other factors, you can gain a more comprehensive understanding of the stock’s potential direction.

Final Words

Stock market volume is a valuable tool for studying market trends, but it’s just one piece of the puzzle. To make responsible investment decisions, it’s crucial to consider a multitude of factors, not just volume. 

If you are getting started with the stock market, you must consider seeking professional guidance from a trusted financial advisory partner. It will help you make mindful investment decisions while lowering your risk exposure.