The Important Indicator of Stock Volume

The much forgotten and unbeautiful volume study in a stock has been making a comeback lately. Some may ask why, others say it is an obvious study. Even though it is an obvious indicator to a stocks health, why has it made a comeback?

The importance of volume is a sign of buyers demand and sellers demand. This can be used as a sign of health in a stock. Big volume up days in a stock will show that there was a big demand for accumulation. Big volume falling days in a stock will show that there was a demand for selling. Looking at one day doesn't necessarily describe the total action in a stock. But having several days can give one a general viewpoint of the health and direction of the stock, the buyers in control or the sellers in control. It is very similar to a tug-of-war or even a football game. A wrestle. If you have several big volume up days and several volume spikes with very little down volume days then that is a sign of buyers. The reverse is said for stocks under distribution. Every stock trade volume can be seen on the .

One of the most valuable things about stock volume indicator is it has to be reported to the tape. All fills go to the tape except odd lots. Block trades to 100 and shares that are shredded by algorithm traders are put out and reported to the tape. This is very valuable and important data. It is real-time and not much can be hidden. Dark pools can't even hide the trades. They even have to report their trades. So when there is a big buyer or big seller in a stock you will see the prints happen. The greater the average volume on a particular stock usually shows a sign of investor interest and following in that issue.

Another thing that volume shows is interest and popularity of a particular stock. Some are more popular with investors than others. This is also a sign of liquidity so that there is not much slippage when entering or exiting a stock. The greater volume a stock has the larger the crowd and popularity of that particular stock. Stocks that don't have as much volume traded also show a sign of popularity and the stock might be an undetected gem. In general if a stock has very no volume that usually means that nobody wants it. Stocks with more volume have something that investors desire.

Looking at volume is very valuable in determining supply & demand, its accuracy of buyers & sellers, and, showing a stock's favor. These elements are a reason why stock volume is so important. The next time you look at a stock chart, look at the volume and see if you can see who is in command buyers or sellers?


Julina Le Paintz is an economic free agent writer and very passionate about her subjects. The financial markets interest her because of the various trading ideas. She also uses the NYSE volume for market health.