Volume (finance)

The term trading volume (including volume and trading volume called ) refers to the number or value-based amount of traded in a given period on a stock exchange financial objects such as securities or contracts.

Definitions

It can be either by the trade with a particular object, all objects of a particular market segment or about a total market turnover.

Trading volume can also specify the scope of a single transaction or multiple transactions of a market participant, respectively. In some countries, a stock transfer tax is levied on the stock exchange turnover.

The development of stock exchange turnover over a certain period is called sales development. Sales histories are an important indicator in technical analysis. You can draw conclusions about the positioning of market participants to and on the formation or reversal of market trends.

Interpretation

Larger companies tend to have a larger volume of trade. This is primarily due to the higher market capitalization, but also to the media attention that is given to them. Smaller companies with lower market capitalization, on average have a lower trading volume. However, this can be more volatile the price development, as lower revenues can already cause significant price fluctuations. This constitutes a form of liquidity risk, both buyers and sellers.

Trading volume also serves as an indicator in technical analysis, eg determination or confirmation of trends. Furthermore, patterns of chart analysis can be evaluated as meaningful if they are accompanied by high or low trading volume.

The trading volume of all securities in a stock exchange is an indicator of the market position of the stock market and thus in the interpretation comparable to the turnover or the assets under management of other companies.

Legal Significance

In the United States, the trading volume of a security also has a legal meaning. Who buys a certain number of a security relative to the volume traded or sold, falls under Article 144 of the Securities Act of 1933. Calculation of the trading volume is, therefore, made ​​by the United States Securities and Exchange Commission (SEC).