Volume as Defined in Stock Trading

Stock trading involves many terms that a starting stock needs to be familiar with. Differentiation between a price and a value is just one of those things. Another term that will be constantly encountered by a stock trader is the word "volume". 

The volume of a stock is a term for the amount of shares traded over a given time period, usually one day. This gives traders a rough idea of a stock's volatility. Companies with large volumes usually see less fluctuation in their stock since small changes in trading volume will not affect the price as much. Disconnects between price and volume can spell future trouble for a stock's price. A decline in a stock's volume is sometimes a predecessor of price declines. When volume begins to drop it is often a signal of problems within the fundamentals of the stock.

When traders and investors begin to lose interest in a stock, it means that it is not being traded as much. Volume, in this respect,symbolizes the strength of the stock. Stock prices will go through their biggest periods of change when volume is at its highest. Remember, this can go both ways. If the volume of the stock starts to rise and price is dropping, this can be a signal that the stock's price is about to reverse and become bullish. Short sellers should avoid a bullish stock since this type of stock is either already rising pr about to rise in price. A stock's volume tends to be higher right at the opening of the trading day, and the again at the end of the day.

Volume is what drives price. A stock cannot go through a price change if there are no shares being bought or sold. In other words, without a catalyst, stock prices will remain stagnant.