Trading volume refers to the number of shares (stock trading) or contracts traded during a defined period.
For a particular day, if trader 1 bought 1000 shares of stock X and trader 2 sold 2000 shares of the same stock, then the trading volume for that day would be equal to 3000 shares. The reason, the trading volume increased when trader 2 sold its shares, is that another investor actually bought these 2000 shares.
Trading volume is widely used by traders in technical analysis. It is an important measure of investors' sentiment regarding the market or the traded security.
Several reasons may explain spikes in trading volume for a particular stock; this includes earnings announcements, important news, and institutional activity (buying and selling of large blocks - block trades).
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
