Investing Basics: Volume
Volume is the number of shares that are being traded of a given asset over a set time period. Typically when you look up a ticker you will see the days trading volume. This is how many shares were traded during the day. Volume can also tell you about the investor sentiment. Investor sentiment is often based on trends or news that they hear. And while you can’t always confirm what is going on, the general idea is that if volume remains high then there is general optimism around an asset. Now volume shouldn’t be the only metric you are using to determine whether or not you should invest in a stock. Volume is more of a secondary measuring tool.
No one metric should be your sole reason for investing, there should be strong reasons across the board that support investing in an asset. Depending on the type of investing you do the importance of this metric will vary. For day traders volume may play a huge role in whether or not they make a trade. For a long term investor, the volume on a given day may not matter. All information when investing is valuable or not valuable based on the given context of the situation, time and need.
