Volume is the quantity of individual units of an asset or security that is traded in a market between buyers and sellers. It is measured on a trade-by-trade basis over a given period.
Understanding the Term
In the stock market, volume is expressed in shares. A share of stock represents partial ownership of a company, hence the term share. A share is a basic unit that describes the quantity of a stock and other securities. Volume is the number of shares exchanged in a single transaction.
For instance, if a buyer purchases 200 shares of stock from a seller, the total volume of this transaction is 200 shares. Whenever a contract is traded, there has to be a buyer and a seller in order for the transaction to take place – each transaction is a single exchange and will contribute to the trading volume.
Volume measures the number of shares traded in a stock or contracts traded in futures or options. They reveal how many investors participate when a security’s price changes, and the more participation, generally the more credible the move.