Trading Volume

What is Volume?

Volume is the number of shares traded in a day. High volume means lots of trading activity. Average volume (3M) shows typical daily trading over 3 months.

Think of it like this

Imagine a flea market. One booth sells 10 items per day (low volume, illiquid). Another sells 1,000 items (high volume, liquid). It's easier to buy or sell at the busy booth!

Formula

Average Volume = Sum of Daily Volumes / Number of Days

Why it matters

  • Shows liquidity - can you sell easily?
  • High volume means easier to trade
  • Volume spikes signal major news or events
  • Low volume means wider bid-ask spreads

Real-world example

Apple volume: 50M shares daily - very liquid, easy to trade. Small cap stock: 50K daily - might be hard to sell large position quickly.

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This is educational content, not financial advice.