Trading Volume

Number of shares traded in a given period; a sign of conviction.

Trading volume is the total number of shares, contracts, or units of a security that are bought and sold during a specific period, such as a single trading day. It is a direct measure of market activity and liquidity. Every completed transaction between a buyer and a seller contributes to the overall volume count; if one investor buys 100 shares from another, the volume increases by 100 shares, not 200. Investors and technical analysts track trading volume to assess the strength and sustainability of price movements. High volume indicates strong investor interest, high liquidity, and a high level of agreement or conviction behind a price change. Conversely, low volume suggests weak interest, lower liquidity, and less conviction, which can make price movements less reliable and more prone to sudden reversals. A common pitfall for retail investors is ignoring volume when analyzing price breakouts. A price breakout above a key resistance level on heavy volume is generally considered a strong, bullish signal that the upward trend will continue. However, if the price breaks out on low volume, it may be a "false breakout" or a trap, as there is not enough buying pressure to sustain the higher price.

On a Tuesday, Investor A buys 500 shares of Company XYZ from Investor B. Later that day, Investor C buys 300 shares of Company XYZ from Investor D. At the market close, the total trading volume for Company XYZ is calculated as 500 + 300 = 800 shares.