Sudden spike in volume of a script can excite many traders. These smart traders understand & know reasons for heavy trading volume in stocks. It is a golden money making opportunity to increase their profits with minimum risk.
In share trading, volume is defined as the number of shares or contracts of a given security traded over a designated period. It is usually a primary driver of stock markets & individual stocks.
In technical analysis, it provides a simple yet valuable tool to determine extent of trader’s participation in current trend. However, new & unskilled traders often overlook volume analysis.
It is due to fact that volume statistics can be found about anywhere & perhaps they don’t know how to use it. On the other hand, smart traders know how to utilize volume along with other technical indicators.
This can greatly help you to boost your profits tremendously. Here are 11 reasons behind surging trading volume in stocks:
[You can also watch an exciting video on this post from GetUpWise channel on YouTube.]
(1) Strong Fundamental Changes
It is one of the best reasons for heavy trading volume in stocks. In finance, fundamentals are the financial characteristics of a company.
Investors & traders usually perform fundamental analysis along with technical analysis before investing in the stocks of a company. It is extremely essential step to determine stock valuation.
Some of the common indicators used to assess company’s fundamentals include cash flow, return of assets, dividends received by investors, earnings per share, sound capital management and many more.
If a stock start showing positive or negative fundamental changes then it is quickly reflected in its stock price.
According to a post published in Investopedia, an increase (or decrease) in share price along with jump in volume is often an indicator of positive (or negative) fundamental changes.
Thus, you can expect that something in the stock has fundamentally changed.
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