Trading Volume
Trading volume is the number of shares or contracts of a security traded during a given period, usually one trading day.
Volume tells you how much trading activity took place in a stock. If 2 million shares changed hands today, the daily volume is 2 million. Each trade counts once, so a share sold by one investor and bought by another adds one share to volume, not two.
Volume helps investors judge how meaningful a price move is. A price jump on very high volume suggests strong interest from many participants. A move on low volume may be less reliable. Volume often spikes around earnings reports, index changes, big news and at the open and close of each trading day.
Average daily volume, typically over 30 or 90 days, is a common measure of a stock's liquidity. Higher average volume usually means tighter bid-ask spreads and easier trading for large orders.
Volume can also be expressed in dollars, by multiplying shares traded by the price. That makes it easier to compare stocks with very different share prices.
Example: a stock normally trades 500,000 shares a day. After a surprise announcement, 5 million shares trade, ten times the usual volume.