What is the Volume of Trade?

Calculation Example

Let us take the example of the New York Stock Exchange to understand the concept. Here, we typically take a scenario of three stocks listed in the markets. Based on these three, we will calculate the volume of the trade. For example, suppose the stocks are Apple, AT&T, and Verizon. Let us assume the first trader buys 1,000 shares of Apple and sells 500 shares of AT&T. The other trader now buys 1,000 shares of AT&T and sells 500 shares of Verizon to the first trader. Thus, the total volume of shares traded on this particular day is 2,000 (1,000 of Apple+ 500 of AT&T+ 500 of Verizon). Thus, the net impact of buying and selling the respective shares on a particular trading day gives us the trade volume.

Key Takeaways

  • The volume of trade refers to the full measure of the number of securities, i.e., shares or contracts traded during a specific trading day. A higher volume of trade for a specific security means more liquidity attachment. The security possesses better order execution and a more available market for associating buyers with sellers.It performs like the most straightforward technical indicator.Traders use the trade volume to know the liquidity level associated with a specific asset. It also indicates that it is easy for a trader to enter and get out of stock or contract, depending on the asset’s activeness level. Finally, it helps traders know about interested buyers and sellers for a specific stock and at what prices one may enter or leave the stock or contract. Therefore, traders use the volume of trade as a winning strategy.

How is the Volume of Trade Expressed?

The volume of trade one may express as the total number of stocks or contracts exchanged between buyers and sellers of specific security during the trading hours of a trading day. It measures the activity prevailing in the market, and the liquidityLiquidityLiquidity is the ease of converting assets or securities into cash.read more available. It can help the investor or the trader decide on specified times related to the transaction. It also acts like the simplest technical indicator Technical IndicatorTechnical indicators refer to technical analysis tools used by investors to make investment decisions based on future price movements derived primarily from historical prices. read more. All the market exchanges track this data and present the volume data. The volume of the trade numbers is reported hourly throughout the entire trading day. This trade volume, which gets noted hourly, is termed an estimate. The figure, written at the end of the day, is also called an estimate. The full and final figure for a particular day is reported the following day.

The Volume of the Trade Chart

In trade, volume means the number of units transacted in buying or selling stocks and contracts over a particular time or a trading day. Traders may rely heavily upon it because it shows the asset’s liquidity level and how easily one can get in or out of the stock or contract. Generally, there are two types of volumes: buying and selling volumes. The stock is very easy to buy and sell when the volume is high. On the other hand, when the volume is low, it is not easy to buy or sell the stock. That is because there must be a buyer and seller for a successful trade. When this is marked on a chart, it is the trade chart’s volume. Generally, it is shown by a bar chart. Volume bars are usually colored red or green. A green volume bar means that the price of the share of contracts has gone high during the particular trading day, and the estimate provided based on it is “buy,” or the stock is considered buying volume. On the other hand, when the color of the volume bars is red, the price has declined during the trading day, and a selling volume is estimated based on the same.

Trading Volume for Traders

The volume of trade is a very significant technical indicator for traders. Traders use this to understand the level of liquidity attached to a particular asset. It also points out how easy it will be for a trader to enter and come out of stock or contract based on the level of activeness of the asset. Finally, it helps traders understand how many interested buyers and sellers are present for a particular stock and at what prices one can enter or leave the stock or contract. Thus, traders use it as a winning strategy.

Advantages

  • It shows the level of liquidity attached to the asset.It acts as one of the key technical indicators for traders.It helps the traders to understand the point of entry and exit of the particular investment.It is a key aspect to consider when traders opt for intra-day trading.It helps to understand the momentum in security and identify a trend.

Conclusion

The volume of trade is a very important parameter for trading. It acts as one of the important technical indicators for traders based on which they can decide whether to enter into a trade or exit from a business. In addition, it tells us how liquid the asset is. All the stock market exchanges calculate and provide this information.

This article is a guide to the Volume of Trade and its definition. Here, we discuss examples, the volume of trade in stock market along with advantages. You may learn more about financing from the following articles: –

U.S. exports to China in 2021 were $151.1 billion, a 21.4% ($26.6 billion) increase from 2020; the U.S. imports from China were $506.4 billion, a 16.5% ($71.6 billion) increase. Conversely, the trade deficit with China was $355.3 billion, a 14.5% ($45.0 billion) increase.

The trade volume means the total number of shares or contracts traded between security buyers and sellers in trading hours on a given day. It is a market’s activity measure and liquidity during the time.

AfCFTA may increase trade value to $12bn and lessens trade cost by 20 percent through providing achievement of an omnibus bill on AfCFTA. It executes trade and infrastructure programs or enhances competition. Moreover, it also evolves adequate capacity and arrowhead products and services export.

According to the United Nations COMTRADE database on international trade, China’s exports to Japan were U.S. $165.82 billion in 2021. China exports to Japan – data, historical chart, and statistics. It was last updated on January 2023.

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