Importance of Volume in Stock Investments

Simple Investing Summary: volume provides an additional dimension in selecting investing opportunities.  Price and volume should always be considered simultaneously when making investment/trading decisions.

Volume is that total number of shares, contracts (Futures), etc. that is traded (bought or sold) in the market. There are four price levels for analysis on the chart: open, high, low and close. Volume provides an additional perspective for the analysis. Combine these five values over time different frames (5 minute, 15, minutes, Hourly, etc, Daily, Weekly, etc) and one get a somewhat full picture of what is happening with the stock or whatever you are trading.

Per Wall St Journal, the average daily trading volume in the U.S. is over 6 billion shares currently. People are back in the market after the financial crisis of 2008.

So, what is the importance of volume in making trade decision you ask? Well, volume is the one of the indicator that highlights price movement over a period of time. Large institutions, hedge funds, etc buy stock over number of days to build their position and this will reflect in the higher than average trading volume.

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