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What is the Volume of Trade?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 04 December 2016
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    Conjecture Corporation
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The volume of trade is the amount of futures contracts or the total number of securities that are being traded within a specific time frame, often a trading day. In presenting a volume of trade, it is possible to consider that volume in terms of the type of trades being conducted, such as either what is sold or what is bought throughout the period under consideration. It is also possible to present the volume in terms of the number of units involved in those trades, or the total value of those items.

Just about any type of security or commodity can be included in assessing the volume of trade for a specific time period. In some situations, trade levels are focused on the number of shares bought and sold, while at other times the focus is on the number of bonds that are moved during that time frame. It is also possible to consider the activity of investments like commodities in terms of fulfilled options or futures contracts, or even the number of new futures contracts that are created during the period.

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Calculating the volume of trade may focus on the activity that takes place across a given market or exchange, or have to do with trading activity associated with a given industry. Corporations that issue shares of stock will also look closely at the volume trade associated with those shares during a given period, paying close attention to how many shares were bought and sold, and in some cases who bought or sold those shares.

Assessing the volume of trade is helpful in a number of ways. Investors may track the trading that takes place on specific securities as a means of determining if they should purchase those securities. In situations where they already own shares of those securities, tracking the volume can also sometimes yield important information regarding where the price for those shares is likely to move over the next several months. Paying attention to that movement, as well as the number of shares involved in that movement, can make it possible to avoid incurring a loss or lead to earning a significant return.

Economists often consider the volume of trade connected with specific markets or market sectors to be a way of gauging the overall health of a nation’s economy. Depending on what is selling briskly, what is being offered for sale at low prices, and how much actual buying and selling is taking place can reveal a great deal about investor confidence, and provide valuable clues as to how those investors are perceiving various events like political changes or the issuance of some new laws that affect the operation of business within the nation. While not the only tool used by economists to determine the health of the economy, assessing the volume of trade can often point the way to other relevant factors and make it easier to determine how these various factors combine to impact the overall economy.

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