What is the volume in the market and how it helps in day trading?
Profitable trading provides for a complete understanding and study of the market, as well as the forces that have a significant impact on it. Along with technical and fundamental analyses, the volume of trades performed is by no means of little importance. Even controlling their emotions and trading in compliance with Money Management rules according to a proven strategy, traders lose funds on some transactions. This happens at those moments when large participants (market makers) appear on the market, having a significant impact on current events.
Market makers make deals in large volumes and significantly affect the movement of the price trend. Volume is the number of trading operations for a certain time period. Volume analysis or VSA (Volume Spread Analysis) must be taken into account by investors when performing trading operations. Moreover, it analyzes not only the total number of trading operations but also the format of the candles (the location of the opening and closing points). Market analysts are constantly monitoring this to make correct forecasts.
It is impossible to get one hundred percent data on trading volumes because this market is decentralized. Therefore, there is no definite place where such information could flock. Brokers provide such information only about their customers, which means that it cannot be complete. A variety of indicators are created based on VSA analysis. But they reflect information about traders trading with a particular broker. More accurate information can be obtained from the most popular brokers (for example, Alpari), whose number of clients is maximum. However, even they will not be able to reflect the real picture of trade transactions.
Types of buying and volumes
Quantitative. This is the total number of transactions completed in a given period of time. With its help, any investor has the opportunity to analyze the distribution of the number of transactions inside the candlestick at various price levels. Thus, levels with a sharp increase in the activity of traders can be designated as support and resistance. Exchange – the number of traded shares. Tick, depending on the speed of price changes. It actually differs from the real one; however, it reflects the interests of participants in the trade quite correctly.
Stock trading volumes
The exchange volume is determined by the specific number of transactions with securities for a certain period. In this case, the investor has three indicators available – price, time, volume. In the stock market, the last parameter is equal to the number of shares exchanged between buyers and sellers.
For example, a buyer acquired 20 shares. The volume will be 20. If, after that, the person who bought 20 shares sold 10 of them, then the total volume will be already 30.
Significant changes in the total number of securities sold and acquired are taken into account when traders make important trading decisions. When an investor who wants to purchase stocks that are rising in price notices that the volumes of these securities are not increasing, he will most likely refrain from making a deal. The trader will decide to implement the deal if, with rising prices, the total number of traded shares increases. In the stock market, you can always find out the real volume, which is a significant factor in the purchase/sale of securities.
More buy and more sell. Trading using CME Group reports
The lack of centralization forces investors to look for other trading platforms where information about the general picture of price changes is closer to reality. Armed with reliable data, they can subsequently be successfully applied in trade.
One such site is the reputable CME Group, which is the operator of Chicago’s largest commodity exchange. It is the centralization of all trade operations that distinguishes it from the international global market. All transactions within the CME Group are visible to all bidders. Here a real volume indicator is formed, allowing you to create full-fledged trading strategies.
Some words to the conclusion
Competent management allows you to attract large market makers, thereby increasing liquidity. The share of electronic trading is about 95% of the total volume of trading operations. It is no coincidence that the Chicago Exchange contracts affect global pricing. Mainly, the volume is many shares, contracts, lots that changed hands during some selected period. This is another tool that could make your trade on the market more profitable.