Volume refers to the total number of shares that are bought and sold during a specific period of time. It is a measure of the total activity and liquidity of a particular stock or the entire market.
Volume can provide important information to investors and traders. High trading volume typically indicates strong interest in a stock, and it can signal important market trends and changes in investor sentiment. In contrast, low trading volume may indicate low interest in a stock, which can make it more difficult to buy or sell shares.
Low trading volume in the stock market can increase the risks for investors in several ways.
Volume can also be used to analyze market trends and patterns. For example, a sudden increase in trading volume for a particular stock may signal an upcoming announcement or event that could impact the company's performance or market sentiment. Conversely, a decrease in trading volume may signal a lack of interest in a particular stock or market in general.
Amazon has 1 million shares outstanding. During the course of a trading day, 100,000 shares of that company's stock are bought and sold. In this case, the trading volume for that day would be 100,000 shares.
If the next day, only 50,000 shares of the company's stock are bought and sold, the trading volume for that day would be 50,000 shares. The volume is a measure of the total activity and liquidity of the stock on a particular day or over a given period of time.
When you buy one share of a stock and someone else sells that share, the trading volume is one. This is because one share has changed hands in the transaction.