In capital markets, volume, or trading volume, is the amount (total number) of a

security" \n\n\nsecurity.txt is a proposed standard for websites' security information that is meant to allow security researchers to easily report security vulnerabilities. The standard prescribes a text file called \"security.txt\" in the well known locat ...

(or a given set of securities, or an entire market) that was traded during a given period of time. In the context of a single stock trading on a stock exchange, the volume is commonly reported as the number of shares that changed hands during a given day. The transactions are measured on stocks, bonds, options contracts,

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

s and commodities. The average volume of a security over a longer period of time is the total amount traded in that period, divided by the length of the period. Therefore, the

unit of measurement A unit of measurement is a definite magnitude of a quantity, defined and adopted by convention or by law, that is used as a standard for measurement of the same kind of quantity. Any other quantity of that kind can be expressed as a multi ...

for average volume is shares per unit of time, typically per

trading day In business, the trading day or regular trading hours (RTH) is the time span that a stock exchange is open, as opposed to electronic or extended trading hours (ETH). For example, the New York Stock Exchange is, as of 2020, open from 9:30 AM Easte ...

Significance

Trading volume is usually higher when the price of a security is changing. News about a company's financial status, products, or plans, whether positive or negative, will usually result in a temporary increase in the trade volume of its stock. Shifts in trade volume can make observed

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

movements more significant. Higher volume for a stock is an indicator of higher

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...

in the market. For institutional investors who wish to sell a large number of shares of a certain stock, lower liquidity will force them to sell the stock slowly over a longer period of time, to avoid losses due to slippage.

Legal implications

In the United States, the Rule 144 of the Securities Act of 1933 restricts the buying or selling of an amount of a security that exceeds a certain fraction of its average trading volume, also known as relative volume. Therefore, the calculation of the trading volume is regulated by the SEC.

References

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Significance

Legal implications

See also

References