The stock market is a world of jargon and acronyms. It can be a very difficult place for the average investor to understand the basics and this can make it very difficult to embark on the path to becoming an experienced and smart investor. Many people have no interest in the market, preferring to let others manage their finances. Others prefer to be much more hands-on. Unfortunately it can be very difficult to be in the middle. Understanding terms like stock market volume is one of the first tasks.

What is Stock Market Volume?

When discussing any type of issue that is traded, volume represents the number and size of the transactions in that issue. For example, if company XYZ has three transactions of 500, 1000 and 1200 shares, then it has a volume of 2700 shares. So when discussing the market as whole, stock market volume, represents the total number of shares that traded in a particular period of time. Daily and weekly volume are very common topics of discussion, although volume can be applied to any period of time. So for example, we might say the NASDAQ traded 1 billion shares today. A volume number makes no sense unless it is associated with a period of time.

Why does Stock Market Volume tell us?

The volume of the stock market is often viewed as a measure of the conviction of a move. For example, if the Dow Jones Industrial Average goes down by a large percentage, but does so on light volume, it might be viewed as a less meaningful move than if it goes down on large volume. Increases in volume lead to more liquidity meaning it is easier to buy and sell an issue. For example, when the stock market volume is low, then you may see large variations in prices due to insufficient buyers or sellers.

The meaning of volume is usually most easy to define in relative terms. 100,000 shares may be a great many, or a small amount for a company. You should compare it to its average volume to get an idea if that is high or low volume. What is high volume for one issue may be very low volume for another.

Where can I find Stock Market Volume?

The "stock market" can mean a lot of different things, so typically you will see the volume of a given index. For example, if you get a quote on the Dow Jones Industrial Average, you will see a volume number. This will give you the total number of shares that the stocks that made up that index traded that day.

Learning what is stock market volume and other terms is one of the first and most important steps in becoming a knowledgeable investor. Even if you still want to let a professional manage your money, the more you know about the language and jargon involved, the better you will be able to direct your money manager.

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