Stock Market Volume

By: Bradley A Johnson
The world of investing is not user friendly. It can be extremely difficult for the average person to comprehend the basics and this can make it very difficult to become a confident investor. Many have no interest in finance, preferring to let professionals manage their money, while some are very involved in their own financial future. Moving from one group to the other can be very difficult. Learning about terms like stock market volume is one of the first tasks in moving along that path.

What is Stock Market Volume?
When discussing any type of stock or other issue that is traded, volume represents the size of the total transactions in that issue. For example, if stock XYZ has three transactions of 600, 800 and 1300 shares in a period of time, then it has a total volume of 2700 shares. When discussing the market as whole, stock market volume, represents the total number of shares that traded in a time period. Daily and weekly volume are very common topics of discussion, although volume can be applied to any period of time. So for example, we might say the NASDAQ traded 1 billion shares today. A volume number makes no sense unless it is associated with a time span.

Why care about Stock Market Volume?

The volume of the stock market is often viewed as a measure of the strength of a move. For example, if the Dow Jones Industrial Average goes down by a large percentage, but does so on light volume, it might be viewed as a less meaningful move than if it goes down on large volume. Increases in volume lead to more liquidity meaning it is easier to buy and sell an issue. For example, when the stock market volume is low, then you may see large variations in prices due to insufficient buyers or sellers.

The meaning of volume is usually most easy to define in relative terms. 100,000 shares may be a great many, or a small amount for a company. You should compare it to its average volume to get an idea if that is high or low volume. What is high volume for one issue may be very low volume for another.

Where do I find Stock Market Volume?

The "stock market" can mean a lot of different things, so typically you will see the volume of a given index. For example, if you get a quote on the Dow Jones Industrial Average, you will see a volume number. This will give you the total number of shares that the stocks that made up that index traded that day.

Learning about stock market value and other terms is one of the first and most important steps in becoming a knowledgeable investor. Even if you still want to let a professional manage your money, the more you know about the language and jargon involved, the better you will be able to direct your money manager.