How Important is Volume in Investing

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Volume is the number of shares of a stock that are bought and sold each day.

If you’re a Buy and Hold Investor, my guess is that Volume of shares traded may have little importance to you since you are not planning on selling that stock anytime soon.

However, if you are a Trend Follower, Trade Volume is very important.

Why?  Low trading volumes increases risk!

Trend Followers are loath to increase risk as should all investors.

If the volume is below 500,000 shares per day, it might be difficult to sell your shares especially in the event of a market downturn when there are many more sell orders than buy orders.

If you’re a true Trend Follower you would be employing Stop Loss transactions as an integral part of your investing risk management strategy.

With sufficient “trading volume”, your Stop Loss Order will typically be filled almost immediately.

It is generally agreed that a trading volume of 500,000 shares traded daily is usually sufficient. However, 1,000,000 shares traded is a much safer target.

In short, the more shares that trade on any given day on any individual stock, the higher the likelihood your broker will be able to find a buyer when you are ready to sell.

Trading Volume matters and so do Trailing Stop Loss Orders!

The point of investing is to make profits.   So, Ride Those Winners and Cut Your Losses.

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