What is Volume in the Share Market?
In the stock market, volume refers to the total number of shares traded during a specific period. It shows how active and liquid a stock or the overall market is. Each time a share is bought and sold, it adds to the stock market trade volume, even if the same shares are traded multiple times.
For example, if 100 shares of a company are bought and sold again on the same day, the total trade volume will be 200. High volume typically indicates that many people are trading a stock, whereas low volume signifies that fewer buyers and sellers are involved in the transaction.
If you’re planning to open an online Demat account, understanding trade volume is essential as it helps you identify liquid stocks and make smarter investment decisions right from the start.
Key Components of Stock Market Trade Volume
Volume trading relies on several key elements:
- Volume Bars: These bars on stock charts show the number of shares exchanged over a specific period. A sudden increase in stock market trading volume often signals potential price movements, reflecting heightened market activity.
- Volume Patterns: Traders study trade volume patterns to identify trends. A breakout with significant share market trade volume is more reliable, showing strong participation.
- Volume Indicators: Metrics like On-Balance Volume (OBV) and Chaikin Money Flow are used for trading volume analysis. They track fluctuations in stock volume, helping traders gauge buying and selling pressure and anticipate reversals.
These elements are crucial for analysing trading volume and making informed market decisions.
How Does Stock Market Trade Volume Work?
Stock market trade volume shows the total number of shares traded in a specific period and reflects investor interest in a stock or the market. Each time a buyer and a seller agree on a price, the trade volume increases by the number of shares exchanged.
For example, if 1,000 shares are traded in a day, the day’s stock volume becomes 1,000.
Exchanges such as NSE and BSE report share market trade volume daily for stocks, indices, and the overall market. Traders use this data for trading volume analysis to decide whether to buy, sell, or hold.
If you aim to invest in stock for the long term, monitoring trade volume helps you assess whether a stock has consistent interest from market participants, ensuring more stable investment decisions.
How is Trade Volume Measured in the Stock Market?
Volume is measured by counting the total number of shares traded during a given period. It can be tracked hourly, daily, weekly, or even monthly. The data is published by stock exchanges after every trading session.
| Time Frame | Volume Measurement Type | Usage |
|---|---|---|
| Hourly Volume | Shares traded in one hour | For short-term intraday analysis |
| Daily Volume | Total shares traded in a day | Commonly used for day trading |
| Weekly Volume | Combined trading activity in a week | For trend confirmation |
| Monthly Volume | Long-term investor interest | To study long-term participation |
Traders view trade volume through volume bars beneath candlestick charts, where green bars indicate buying pressure and red bars indicate selling pressure. Some charts, like volume candles, integrate volume into the candlestick’s width for combined price and volume analysis.
What Does Stock Market Trade Volume Indicate?
Trading volume reflects the level of activity for a stock by recording all buying and selling transactions. It measures market interest and overall activity.
- High Volume: Indicates strong interest or activity, often due to positive news like earnings reports or negative events triggering selling.
- Low Volume: Suggests limited activity or interest, with fewer buyers and sellers.
- Market Liquidity: Higher stock volume ensures easier buying and selling without affecting price.
- Intraday Patterns: Volumes peak during market opening and closing sessions, useful for short-term traders.
- Trend Confirmation: Long-term investors use trading volume analysis to confirm price movements and assess trend strength.
Why is Stock Market Trade Volume Important for Traders and Investors?
Stock volume is one of the most important metrics for both short-term traders and long-term investors.
- Shows Market Interest: High volume means strong investor interest and better liquidity.
- Helps Confirm Trends: When price movements are supported by high volume, it confirms the trend’s strength.
- Aids in Entry and Exit Decisions: Traders can use volume data to find good points for buying or selling.
- Reflects Momentum: Increasing volume can show growing momentum in the market.
- Supports Risk Management: Volume-based indicators help set stop-loss levels and manage risk better.
Trading volume analysis helps traders understand whether price movements are reliable or just temporary.
Relation Between Price & Trade Volume in the Stock Market
The relationship between price and trade volume helps investors gauge trend strength and market sentiment. Key pointers:
- Volume up + Price up: Strong bullish trend; high buying interest.
- Volume down + Price up: Weakening uptrend; risk of reversal.
- Volume up + Price down: Strong selling pressure; potential bearish trend.
- Volume steady + Price steady: Possible consolidation, accumulation, or distribution phase.
Analysing these patterns allows traders to anticipate trend continuation or reversal and make informed decisions.
What is Relative Volume and Why Does It Matter?
Relative volume compares a stock’s current trading volume to its average volume over a set period, such as 10, 30, or 60 days. It is calculated by dividing the current volume by the average volume. A relative volume above 1 indicates higher-than-normal activity, suggesting increased interest and liquidity.
Traders use this metric to spot potential breakouts, emerging trends, and shifts in market momentum, helping them make more informed trading and investment decisions.
Conclusion
Trade volume is essential for understanding stock market activity, showing how many shares are being exchanged and helping confirm the strength of price movements. High stock market trade volume signals strong participation, while low volume indicates limited activity.
Using Findoc to track share market trade volume provides insights into market sentiment, liquidity, and trend strength, enabling traders and investors to make informed decisions.
Discover More Blogs
- What is Algo Trading?
- What is Swing Trading?
- What is a Stock Split?
- What is Tick Trading?
- What Is Paper Trading?
Frequently Asked Questions
Trading volume is the total number of shares or contracts bought and sold within a specific period. It reflects the level of activity in a stock or the overall market.
It helps traders assess market strength, confirm price trends, and identify potential entry or exit points by showing how actively a stock is traded.
A good volume depends on a stock’s average trading activity. Higher volume usually indicates stronger interest and easier buying or selling.
Volume measures the number of shares traded in a period, while relative volume compares current trading activity to a stock’s historical average to identify unusually high or low activity.
Volume is shown as coloured bars beneath price charts, with green representing buying pressure and red showing selling pressure. Findoc displays this information in real time for traders and investors.