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SML-154: What is Volume in Stock Trading?
Volume is the total number of shares traded in a stock during a given period, usually one trading day. It shows how active a stock is.
How volume is counted:
Each trade is counted once. If Person A sells 1,000 shares and Person B buys those same 1,000 shares, the volume is 1,000 shares, not 2,000.
Why volume matters:
It shows interest. High volume means many people are buying and selling. Low volume means few people are interested.
It shows liquidity (SML-104). A stock with high volume is usually easier to buy or sell at a fair price. A stock with low volume often has a wider bid-ask spread (SML-153).
It tests price moves. Volume helps you judge how strong a price move really is.
How to read volume with price:
Price up + high volume: Many buyers are supporting the move. It is usually a stronger sign.
Price up + low volume: Only a few traders are driving the move. It may not last.
Price down + high volume - Many sellers are active. This often shows real selling pressure.
Price down + low volume: Fewer people are selling. The fall may be less serious.
What can cause a volume spike:
Quarterly results (SML-59)
Major company news
Index changes
Futures and options expiry days
Always compare with average volume:
A number like "5 lakh shares" means little by itself. For one stock it may be very high, and for another it may be very low. Compare today's volume with the stock's average volume (for example, the last 20 or 50 days).
Total volume vs. delivery volume:
In India, many platforms show delivery percentage. This is the share of traded volume where investors actually took delivery of the shares instead of trading within the same day. A higher delivery percentage often suggests more investment-based buying, but it does not guarantee that the price will rise.
Important limits:
Volume does not predict future prices. It only adds context to what is already happening.
Very high volume can also happen in poor-quality or heavily traded stocks, so it is not a sign of quality.
๐ฅธ๐ฅณ๐ฅณ Price tells you what is happening. Volume tells you how strongly people are acting. Before you trust a price move, check whether the volume supports it, and compare it with the stock's usual volume.