Business, Legal & Accounting Glossary
Volume is the number of shares traded in a given period. Volume indicates the liquidity of the stock. The greater the liquidity and volume, the easier it will be to buy and sell the shares.
Lists showing shares traded by volume also tend to include information on the closing share price and the day’s change in price.
Volume is a measure of trading activity. On stock exchanges, volume is the number of shares trading hands over a given period of time. Not all exchanges count volume in the same manner; on the NYSE, a transaction of 100 shares adds 100 to the volume tally, but on the Nasdaq, the same transaction increases the volume by 200. The Nasdaq method is referred to as double-counting because the buy and sell are viewed as distinct transactions. As a general rule, markets that are completely electronic double-count, whereas physical markets do not.
Market timers often use volume as an indicator of future price change. For instance, some traders believe that a surge in trading volume on a stock is a precursor to a rapid change in price. The theory is that important news does not reach everyone at the same time, so an unexpected increase in volume suggests important news has been leaked.
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This glossary post was last updated: 26th April, 2020 | 5 Views.