Before delving into the relationship between trade volume and stock price variation, let us define the two terms to make things easier. So what exactly is trade volume? Generally speaking, trade volume is referred to as the total number of shares that have been traded over a given period of time. On the other hand, stock price variation is a measure of how the value of a given stock changes on a regular basis. For a given stock, this variation can be calculated by subtracting its lowest value from its highest value on a given day.
There is a very interesting relationship between trade volume and stock price variation. However, before understanding that, it is important that we define the concept of volatility. In every day language, volatility refers to a rapid increase or decrease in the value of a given share during a certain time period. Generally speaking, the more volatility a share has, the less trade volume it will have. This is because investors will be hesitant to buy it, since it experiences such rapid changes in its value, and they do not want to incur loses due to their investment.
Volatility can be taken as a measure of stock price variation, which in turn has a relationship with the trade volume. It is very important for investors to have information on this before buying or selling shares, as it can have a huge impact on the amount of loss or gain that they incur as a result. But where do investors get this information from? It’s very simple! They can hire the services of financial experts, or even employ them for the long term, so that they can procure the desired statistics any time they like.
The relationship between trade volume and stock price variation is usually calculated by experienced financial experts who are studying the market and its shifts on a regular basis. They do this by collecting data, compiling it, and analysing it to draw conclusions. Nowadays, due to the progression of technology, all of this has become easy, and many kinds of software have come out that have cut the job in half. As a consequence, the experts are able to plug in values and obtain quick results, which are more accurate as a computer is used to calculate them.
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