Average Trading Volume as a Liquidity and Price-Movement Measure
Summary
The document defines trading volume as the amount of an asset traded over a period and average volume as total traded amount divided by the length of that period. It explains that volume is commonly expressed as shares per trading day for individual stocks, while the same concept applies across securities and markets. It also notes that volume often rises when prices move or when company news draws attention.
The discussion frames volume as context for interpreting price changes: unusually high activity may make a move more noteworthy, while higher stock volume can indicate greater liquidity. Lower liquidity can make it harder for institutional investors to sell large positions without spreading trades over time and incurring slippage. The page mentions that MetaTrader 5 can display tick or real volume and color percentage breakouts relative to average volume. It gives no detailed breakout rules, empirical test, or caveat about how volume measures differ across markets and data sources.
Key ideas
- Average volume is traded quantity divided by the length of the observation period.
- Volume can increase around price changes and company news.
- Higher stock volume may indicate greater liquidity, while low liquidity can increase slippage for large orders.
- Volume breakouts can be compared with an average, and charting tools may distinguish tick volume from real volume.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.