Stocks Why is volume important in stock trading?

Volume is a fundamental aspect in forming market trends. Volume in stock trading can mean the total stock transactions at a specific time in one time frame.

Volume can be an important indicator for studying investor behavior and trends in market sentiment, trends, reversals etc.

High stock transaction volume means that investors are interested in carrying out stock transactions and causes a high volatility trend which allows confirmation of a strong trend, either uptrend or downtrend.

On the other hand, low stock transaction volume means investors are less interested in carrying out stock transactions. This causes low market volatility and even though the price trend is up or down, it often does not match expectations.

Volume can be related to market sentiment and price movements. Market sentiment is the collective behavior of market players towards the stock, allowing it to increase volume and confirm a trend. Volume can affect prices due to the increasing number of transactions, but the impact is less clear, because at low volume the price may rise, but this can only be a sign of caution because traders are less confident in the stock.

There are several volume indicators available on the trading platform for trading aids refer to the FXOpen blog article

On Balance Volume (OBV), Accumulation/Distribution Line, Volume Price Trend (VPT), dan Chaikin Money Flow (CMF).

Other volume indicators have also been created, such as Volume bars, Mass index oscillators, and Volume zone Oscillators.

Each volume indicator uses a different formula, you can learn more about volume in shares on the official FXOpen blog to get insights how to use volume in trading CFD market.