Stock Market TrainingTechnical Analysis

WHAT DOES VOLUME MEAN IN STOCKS?

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In this post we are going to answer the question, what does volume mean in stocks? Understanding what stock market volume means will help you become better informed about when to purchase a stock and when to wait for the right time to get in. Volume in an important indicator as it confirms the strength of a trend.

Investopedia defines volume as the number of shares or contracts traded in a security or an entire market during a given period of time. Simply put volume is the number of shares traded that day. The higher the volume on a stock the more it will move.

what does volume mean in stocks
Observe the daily chart of $MSFT – note the volume which is just below the candlestick chart. This can be done in ThinkOrSwim by going to Chart Settings > General > check “Overlap Volume”

WHAT DOES VOLUME MEAN IN STOCKS?

Do you find yourself asking what does volume mean in the stock market? The more excitement there is about a stock the more people will want to buy it.

This drives up the volume which in turn drives up the price. As a trader we all want to see the price of the stock we’re in go up. This makes us profit. What does volume mean in stocks? Volume gives the investor a good idea of price action.

Volume can be used to find the momentum of a stock. It also affects support and resistance. If a stock you’re watching is at resistance and volume is coming in and it breaks resistance and holds, the price is going to continue to climb.

If you have an average volume stock it might not rip but could be a slow grind for the way. For every buyer there is a seller. You’ll notice there are certain times of the day where volume picks up because buyers or sellers come in.

What does high volume mean in stocks? High volume, especially in day trading, is really important. When day trading the ideal would be low float high volume.

Low float means there are not a lot of shares out there. So, a stock that has a low float but high volume would be very volatile. The more volatility you have, the more chance you have to make a quick profit. But pay attention! Volatility can work against you as well.

WHAT DOES VOLUME MEAN IN STOCKS? – TECHNICAL ANALYSIS

When it comes to technical analysis, what does volume mean in stocks? Volume is one of the most simple technical indicators out there. All it’s showing is the number of shares being traded.

Have you ever been in a stock when it’s moving and then all the sudden it seems to just stop and take it’s time? If you look at the volume at that moment it’s more probable than not that the volume is going to be extremely low. You’re going to want to try several different technical indicators in addition to volume.

what does volume mean in the stock market
Here is one of my Ichimoku Cloud study setups. I use the Ichimoku cloud indicator along with the 50 SMA, 200 SMA, VWAP, RSI and VOLUME indicators for technical analysis of stocks.

Technical indicators are all important. They show us the trends, support and resistance lines and the patterns of a stock. They give us the information needed to make the best decision when trading. Volume is one simple and fundamental indicator that you can have.

If you see a spike in volume, you’re going to see a fluctuation in price. Add that to the rest of the indicators like moving averages, Ichimoku, MACD and RSI and you are more than prepared. If you need more information on technical analysis the read our technical analysis basics post.

WHAT DOES VOLUME MEAN IN STOCKSUP OR DOWN?

Sometimes when you think of high volume in the stock market, you think the price will be shooting up. That isn’t always the case. Sometimes a spike in volume occurs and the price drops.

People are selling. News is going to be something that affects the price of a stock good or bad. If there’s good news on a stock volume will come in and drive a price up. The same is true with bad news. Volume will come in a drive the price down.stock market volume

what does volume mean in the stock market
Here we see a weekly chart of GE over the last 3 years. Note the high selling volume and the down channel. GE has had bad news for investors over the last year in particular.

There’s nothing worse than staring at a stock all day with no volume. The price action barely moves. That’s why high volume is so important. There are certain days and times that have barely any volume and you’ll notice that the markets are barely moving. If you need help finding volume ThinkOrSwim is a favorite platform we use to read charts. Take our ThinkOrSwim course

WHAT DOES VOLUME MEAN IN STOCKS LIQUIDITY

What does volume mean in stocks? It offers liquidity. The more liquid the market is the more easy it is to trade. Volume drives price. It may be a simple concept but it is a powerful one.

Check out our video on stock volume here to get a better picture of volume and how it affects stocks. If you’d like to learn more about trading be sure to take our courses on our website and join our community, trade rooms and subscribe to our watch lists and watch list videos showing you how we find support and resistance levels to find stocks to trade.

what does volume mean in stocks

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