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Trading Volume

Trading volume refers to the total number of shares or contracts traded in a security or market during a specific period, usually one trading day. It is a key indicator of market activity and liquidity, providing insight into the strength of price movements. High trading volume indicates strong interest in a security, often accompanying significant price changes, while low volume suggests less market interest or indecisiveness.

Example

A stock experiences a sharp increase in price accompanied by a surge in trading volume, signaling strong market interest and potential for further price movement.

Key points

• The total number of shares or contracts traded in a security or market.

• A key indicator of market activity and liquidity.

• High volume often signals strong interest and price movement, while low volume indicates less activity.

Quick Answers to Curious Questions

It provides insight into the strength of price movements, indicating whether a price change is backed by strong market interest or weak activity.

High trading volume increases liquidity, making it easier for traders to buy and sell large quantities of a security without significantly affecting its price.

Low volume may indicate uncertainty or lack of interest, suggesting that price movements are less reliable and could reverse easily.