Trading Volume
What is trading volume?
Trading volume is the amount of shares traded among parties in a certain period of time. This time is usually a day, but it can be much longer, such as a week or a month.
Institutional investors
Generally only stocks with large trading volumes will be bought by institutional investors, such as large banks with billions of dollars in assets. They need to be able to buy and sell large amounts of stock quickly at any given time, and they are much more likely to do so with a stock that trades in high volumes. Some private investors feel more secure with these stocks because of all the savvy insitutional investors that have also chosen to purchase and hold the stock.
Why is it important?
Trading volume is such an important indicator for you because it tells you how significant a price shift is. For example, let's say there are two stocks that are both worth $10, and they both suddenly gain $4 in one day to become $14. If the volume of stock A was 1,000,000 shares whereas the volume of stock B was only 10,000 shares, there is a much bigger shift in stock A. As a result, you can definitely consider stock A to have had a much greater increase in investor confidence.