Volume
Volume
When it comes to trading, several complex terms might leave beginners confused. One such word that frequently crops up is "Volume." In this glossary entry, we'll take an in-depth look at what Volume means in the realm of trading, how it's calculated, and its significance.
Defining 'Volume' in Trading Context
In the realm of trading, Volume references the quantity of stocks, bonds, contracts, commodities, or currencies traded within a given time frame. The time frame can range from seconds, minutes, hours, to even a day. The total count of shares or contracts traded is what constitutes the Volume.
Importance of 'Volume'
An increase in Volume reflects the growing interest of traders in the specific financial instrument. A higher Volume implies more substantial activity and liquidity, making it easier for traders to buy and sell. Conversely, lower Volume suggests less activity and potentially more challenging to find a willing buyer or seller. High trading Volume can also indicate the start of a new trend, whether upward or downward.
Calculating 'Volume'
The measurement of Volume is rather straightforward. For instance, if a single stock share gets traded, the Volume is one. If five shares get traded, the Volume becomes five. So, the Volume gets gauged by the total number of shares traded.
'Volume' And Price
There's a strong connection between the Volume of trades and price changes. Usually, when the Volume goes up, the price of the traded instruments also tends to go up, signalling bullish market sentiment. On the other hand, rising Volume with a falling price can indicate bearish market sentiment.
It's essential to understand that Volume serves as a powerful tool in predicting market trends and spotting potential investments. Indeed, the concept of Volume might seem elusive at first. However, with a bit of practice, you'll come to appreciate its tremendous value in your trading journey.
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