In capital markets, trading volume is the total number of shares that exchange hands between the buyer and seller of stocks within a given period of time (usually within 24 hours).
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In essence, if Mr. K sells 200 shares to Mrs. Z, the volume is 200 shares. A buyer and seller must transact to get the volume of trade in the stock market.
Volume of Trade in Cryptocurrency Market
The emergence of a cryptocurrency exchange has redefined the way financial analysts see trading volume. Hence, the volume of trade in cryptocurrency exchange is the total number of Bitcoin, Ripple, Ethereum, Litecoin, and other cryptocurrencies that are exchanged between buyers and sellers of digital coins during trading hours on a given day.
Today, transactions of securities are measured on stocks, options contracts, bonds, NFTs, futures contracts, commodities, and cryptocurrencies.
The volume of trade on July 4, 2022, may not be the same as the trading volume of the previous day.
Cause of Change in Trading Volume
A lot of factors are responsible for a sudden change in the volume of trade. For instance, trading volume is usually higher when the price of a security is changing. Other causes of change in volume of trade are:
Company’s financial status
A company that recorded more profits at the end of the financial year will experience a higher volume of trade in the capital market. The performance of a company is always attractive to buyers of stocks and investors.
Products
Another major driver of a higher volume of trade is the acceptability of a product or otherwise. For instance, Apple shares is always a ‘hotcake’ in the capital market because of the popularity and acceptability of its products globally.
Future Plans
Is the company penetrating more markets? Is it expanding to other major markets in the world? Do potential investors see the future plans of the company as promising? Positive or negative plans will have an impact on the trade volume of its stock.
In the cryptocurrency market, trading volumes of coins is always higher during peak time and during sell-offs whenever there is a crypto crash. But some cryptocurrency exchanges pause trade during sell-offs as one of the measures to protect their interest.
Regulations
Some countries have laws in place to prevent monopoly of stocks, hence, they restrict the buying and selling of a certain amount of security that exceeds a certain fraction of its average trading volume.
The United States and Nigeria are some countries that have this kind of regulation in place by the countries’ Securities and Exchange Commission (SEC).
Recap:
The number of shares or stocks or number of cryptocurrencies or digital coins that exchanged hands between buyers and sellers is called trading volume.