What Does Volume Mean In Stocks?

What Does Volume

Mean In Stocks?

When you get involved in the world of stock market investing one of the most common things you come across if traders discussing volume and it's importance to the health of the overall market. In this post we want to help answer the age old question of what does volume mean in stocks? Understanding stock market volume is a key to becoming a better investor.

In the simplest terms, volume is the amount of shares that are traded in any stock over the course of a trading day. The bigger the volume, the bigger the potential price movement, whether that be up or down.


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Volume Is The Determining Factor In Whether A Stock Is In A Bull Trend Or A Bear Trend:

When you invest in the stock market the shares that you purchase are a direct factor in the overall trading volume for that day. Did you purchase 5 shares? Well then that means you have added 5 shares of trading volume to the day. Did you sell 5 shares? If so your sales are also counted in the days total trading volume.

Naturally if you are buying stocks you want to see the price increase so that you can make money because while buying a stock can move the price up, selling it has the potential to move it down. Excitement surrounding a stock can entice increased buying pressure from investors. The more people that purchase a stock that you have purchased the greater the likelihood that you will see gains, which is why you always want to see increased buying volume in stocks that you have purchased.

Stock Market Trading Volume Can Mark A Change In Trend:

If a stock has been in a slump and you begin to see a sustained volume increase throughout the day without any significant price movement, that can often mean the early beginnings of a run soon to come. An old investment adage is “volume before price.” While huge volume increases do not always mean that a run is imminent, if you begin to see large purchases hitting a stock, especially one that you're in, you should watch it closely for the potential of the price increasing.

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