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It reflects the liquidity of that market. The more shares, barrels of oil, pork bellies that are traded means that product is easier to sell (more liquid) so the price of that product is more accurate and adjusts smoothly rather than jumping.

You can also look at it in terms of supply and demand. If the volume traded is low then it suggests less people are willing to sell, meaning the product may cost more. The flip side of this is there may be few people willing to buy.

For securities with large numbers of outstanding shares, for example, the volume traded normally is a response to news or changing market conditions.

A Ryzner

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Q: What does the daily volume traded means to the investor?
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