Volume in the stock market is a measure of the number of stocks traded over a specified time period. When a stock is traded actively, trading volume will be high, whereas if the stock is not traded actively, the trading volume will be low.
Some traders/investors may analyze volume as a part of technical analysis to understand the investing trends along with the fluctuations in price movements to help them make decisions about when to buy and sell a particular stock.
Where to find Trading volume in the stock market?
All trading/charting platforms can visually display volume throughout the trading day usually at the bottom of the price chart.
Volume is shown as a vertical bar representing the total volume for the specific gradual charting time period. Volume bars are usually coloured green or red.
Green represents net buying volume while a red represents net selling volume. Some traders prefer to calculate the volume with a moving average to spot when the volume is heavy or thin.
Indicators to calculate Volume in the stock market
Here are a few volume indicators that can help traders to select stocks for trading.
On Balance Volume (OBV)
The on-balance volume is an indicator in which volume is added on days when the overall volume is up and subtracted on days when the overall volume is down. When price and OBV are moving up or down together, it is probably the trend will increase in strength.
Volume Price Trend (VPT)
The volume price trend measures volume considering a percentage increase or decrease in price. VPT helps investors relate share price to trading volume.
If the price of a stock increases, the value of the indicator will also increase. And when the price falls, the indicator value also falls.
Ease of Movement
The Ease of movement indicator helps traders to see how easy it is for a stock price to move between levels based on trading volumes. Stocks that continue along a trend for a given period are considered “easy.”
This indicator is used over longer time periods and in volatile markets in which it can be hard to spot trends.
How to use volume while trading
Volumes are also considered as an indication tool. If the price moves upwards, along with the volume, then we can clearly understand that it is worth paying attention to.
Sharp market move along with volume rises
A sharp market move that goes along with a significant rise in volumes would provide a trader with the greater result that the market is moving upwards/downwards.
Does volume support the wave on a market?
You can also use volume by noting how it supports or doesn’t support each wave on a market. An uptrend with rising volumes on the upwards legs and falling volume on the retracements is expected to continue in that direction.
It makes sense to be cautious of an uptrend where volumes rise on the downward retracements, only to decline when the market moves higher.
Judging market view through volume
A market move that is built upon low volumes is obviously less convincing than a widespread involvement in a round of buying. When volumes increase during a price rise, yet fall during a price drop, that is bullish.
If volumes increase during downwards movement and decrease during upward price moves, this would be a bearish signal.
Relation between the Volume and Price
If the trading volumes in the stock market for a particular stock increase or decrease, it plays a huge impact in the stock price.
High volumes are not always the primary reason for a stock moving up and touching high as there can be several other reasons that influence the stock price.
In many ways, the volume helps investors to confirm the existence of a single trend, and when the price and volume are seen together, it acts as a helpful indicator.
What are Delivery percentage and Delivery volume in the stock market?
Delivery Percentage is the ratio of total delivered quantity to total traded quantity for a particular stock on a given trading day.
Delivery volume is the volume of the stock delivered to the actual buyer out of the total traded volume. If the delivery volume is high, it denotes that so many people are holding the stock predicting a rise in price indicating a trend.
How to use Delivery volume and delivery percentage in trading?
To use delivery volume and delivery percentage in trading, you need to follow the below steps.
- You have to check the market trend and stock trend
- The market trend and stock trend should be in the same direction
- Here you have to select the high delivery volume stocks
- The delivery percentage should be high for the selected stocks
- The delivery volume will make the trend bullish or bearish
This delivery scanner will help you to understand and analyze security-wise delivery positions effectively. For detailed information on the volume and delivery scans, do check out the link.