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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.

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Related Questions

Why does the treasury function rely heavily on the products traded in forex market?

Treasury function relies heavily on the products traded in forex market because they are options of investing. If people invest in forex or stocks, that means they put less money in treasury, and vice versa. Ref: alpari.com/en/investor/


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