An important indicator for those who analyze market activity, planning for market strategies, will be the stock volume. After the price indicator, volume is known to be the most quoted data point which relates to the stock market. The overall activity of the stock market becomes evident through its volume.
The market liquidity is measured by counting the shares traded over a period of time. For options, individual stocks, and indices, the volume data is recorded as a whole.
Stock charts display volume on a histogram and horizontally below the price data. Blue chips are normally traded in millions of shares on a daily basis, as they are common. Billion shares may change hands easily and in a single session. The numerical digit is used on most of the trading platforms to represent the daily volume.
The simple volume measurements are not always sufficient, and traders look for volume by price indicators that are shown in the form of vertical histograms. They present the shares` numbers traded at various increments of price. It is a powerful indicator which combines into a single chart price and volume. The volume by price indicator shows the way in which professionals make use of the market data to plan their profitable trades. Volume is also watched up by index analysts as they use it in their calculations.
The supply and demand of stock are reflected by the volume. A low volume for stocks means that they are illiquid which on the other hand, brings opportunities and risks. The successful trades are obstructed if the volume is known to be low. The reason lies in the difference between what the sellers are asking for the stock and what the buyers are willing to pay. So,, it is hard and even impossible to sell a stock that is illiquid in a quick manner.
Traders are frequently looking at the stock volume while deciding on their next move on the stock market.
Free charting webinar
Mon, Nov 18th, 2013 12:00 PM - 1:00 PM EST
During the 60 minute session Paul Coghlan, founder of Coghlan Capital, looks at current charts for currencies, precious metals, US indices, highlighting turns and low risk entry points using the Median line analysis methodology.
Median line analysis reduces risk and increases the chartists ability to see trend direction, trend strength and highlight entry and exit levels.
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