Volume (finance)
In capital markets, volume, or trading volume, is the number of shares or contracts traded in a security or in an entire market during a given period of time.
In the context of stock trading on a stock exchange, the volume is commonly reported as the number of shares that changed hands during the day. Average volume is reported as the average volume over a longer period of time, normally one to three months. When the significant positive or negative news is made public about a company, the volume of the company's stock will usually deviate from its average volume, meaning that more people are trading this stock.
Higher volume for a stock is an indicator of higher liquidity.[1] For institutional investors who wish to sell a large number of shares of a certain stock, lower volume will force them to sell the stock slowly over a longer period of time.
Legal implications
The calculation of the volume of a security has some legal implications. For example, in the United States, buying or selling a certain number of shares of a security in proportion to its trading volume may be restricted under Rule 144 of the Securities Act of 1933. The calculation of the trading volume is therefore regulated by the SEC.[2]
References
- ↑ Baiynd, Anne-Marie (2011). The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology. McGraw-Hill. p. 272. ISBN 9780071766494. Retrieved 2013-04-30.
- ↑ Rule 144: Selling Restricted and Control Securities
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