Volume

Introduction

What is volume? Volume is a key piece of information for stocks. It tells us how many shares of a stock have been traded in the day. Volume is very simple, but it can provide some important information.

Liquidity

One important thing that volume tells us is how liquid a stock is. Liquidity is how easy it is to sell something. A very liquid item can easily be sold, while a less liquid item is hard to sell. Stocks with high volumes are very liquid because a lot of people are buying and selling them. This is important because if you want to sell your stocks to take profits, it is easy to do so. However, if a stock has low volume and is not very liquid, it can be hard to sell stock when you want to since there aren’t many buyers. If a stock is plummeting, that’s bad, since you will lose more money than you should have.

Trends

Volume trends are interesting to look at. If the amount of people trading a stock increases significantly, that’s a sign that something is happening with the company. It’s not necessarily a bullish or bearish sign, but it means that people are interested in the stock. On the flip side, if volume starts trending down, people could be losing interest in the stock.

Those smaller red and green bars at the bottom represent volume. The colors of the bars don't have anything to do with volume; they just tell you if the stock price increased or decreased. The height of the bars signifies the volume.

Conclusion

Volume seems like a simple metric that doesn’t really tell you all that much, but it is important to look at. Low volume stocks can be pretty dangerous to invest in if you need to sell them, so volume provides a good warning. Trends in volume can also signify important events, so keep an eye on that number.