how volume of trade works
each market exchange tracks its trading volume and provides volume data the volumes of trade numbers are reported as often as once an hour throughout the current trading day these hourly reported trade volumes are estimates a trade volume reported at the end of the day is also an estimate final actual figures are reported the following day investors may also follow a security s tick volume or the number of changes in a contract s price as a surrogate for trade volume since prices tend to change more frequently with a higher volume of trade volume tells investors about the market s activity and liquidity higher trade volumes for specified security mean higher liquidity better order execution and a more active market for connecting a buyer and seller when investors feel hesitant about the direction of the stock market futures trading volume tends to increase which often causes options and futures on specified securities to trade more actively volume overall tends to be higher near the market s opening and closing times and on mondays and fridays it tends to be lower at lunchtime and before a holiday special considerationsin recent times high frequency traders and index funds have become a major contributor to trading volume statistics in u s markets according to a 2017 jpmorgan study passive investors like etfs and quantitative investment accounts which utilize high frequency algorithmic trading were responsible for 60 of overall trading volumes while fundamental discretionary traders or traders who evaluate the fundamental factors affecting a stock before making an investment comprised only 10 of the overall figures traders and volume of tradetraders use various trading factors in technical analysis trade volume is one of the simplest technical factors analyzed by traders when considering market trades the trade volume during a large price increase or decrease is often important for traders as high volumes with price changes can indicate specific trading catalysts high volumes associated with directional changes in price can also help to reinforce support for the value of a security volume levels can also help traders decide on specified times for a transaction traders follow the average daily trading volume of a security over short term and longer term periods when making decisions on trade timing traders can also use several technical analysis indicators that incorporate volume the securities and exchange commission sec regulates the sale of securities by traders according to rule 144 sellers cannot make security sales exceeding 1 of outstanding shares of the same class being sold example of volume of tradesuppose a market consists of two traders trader 1 and trader 2 the first trader buys 500 shares of stock abc and sells 250 shares of xyz the other trader sells those 500 shares and buys the 250 shares of stock xyz to the first trader the total volume of trade in the market is 750 500 shares of abc 250 xyz shares this is because we do not double count the volume when trader 1 buys 500 abc shares from trader 2 only 500 shares are counted likewise only 250 shares of xyz would be recorded on the volume tally investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 