Trading Volume Definition
Trading volume refers to the number of shares, contracts, or crypto coins that are traded within a specific period, often on a daily basis. It’s an important metric in the financial markets because it provides an insight into the efficiency and liquidity of a particular security or market.
Trading Volume Key Points
- Traded volume is the measure of the number of shares, contracts, or crypto coins traded in a given time frame, usually one day.
- Trading volume provides insight into the intensity and severity of trading in a particular security or market.
- It is used to predict market trends and patterns, providing indications about investor sentiment.
- High trading volumes are generally associated with market volatility and can indicate potential price movements in either direction.
What is Trading Volume?
Trading volume is a term used in the financial world to refer to the measurement of amounts traded during a specific period. It gives investors a vivid picture of the overall market activity and liquidity of a particular coin or trading pair. A coin with low trading volume might be harder to buy or sell, while a coin with high trading volume is likely to be traded frequently.
Why does Trading Volume matter?
Trading volume matters because it gives investors vital insights into the price action of a particular asset. Typically, a high trading volume indicates high investor interest and possible liquidity. This means traders can buy or sell the asset easily without significantly affecting its price.
When is Trading Volume Used?
This metric is used mostly by traders and investors when charting or analyzing market trends. Understanding trading volume can help these market participants decide when to enter or exit trades, pinpoint potential reversals, validate price breaks or address investment strategies.
Where is Trading Volume reflected?
Trading Volume is usually reflected on the y-axis of a stock chart or any trading platform where you can see the progression of buy/sell orders of an asset. Some trading platforms allow the depiction of volume in the form of horizontal or vertical bars.
How is Trading Volume Calculated?
Trading volume is calculated simply by counting the number of shares, contracts, or crypto coins traded within a given period. The resulting figure represents the total number of assets traded within the prescribed timeline.
Who is Concerned With Trading Volume?
Traders, investors, and market analysts are generally interested in trading volumes. This includes both retail and institutional investors. While day traders might use it to decide their short-term strategies, long-term investors may use it to evaluate market sentiment towards a particular asset.
