What is the Ideal Minimum Volume for Swing Trading Stocks & ETFs?

You can take advantage of analyzing the strength of a trend based on volume activity. Unless you’re operating a massive individual trading account, your individual transactions within a stock will typically have a minimal (if any) effect on the price. Remember that Average Dollar Volume gives a more complete and accurate picture of a stock’s true liquidity, compared to just knowing the ADTV. Not to be confused with Average Daily Trading Volume, Average Dollar Volume is a ratio that is calculated by multiplying the share price of a stock times its ADTV. Regardless of what you may have heard, size does matter (at least when it comes to stocks).

• Investors often use trading volume to confirm the existence or continuation of a trend, or a trend reversal.
• If we break above resistance but we have negative readings on the CMF indicator that is a potential false breakout.
• For example, trading volume may pick up if political or economic fears trigger a sell-off.
• In stocks the volume is the total number of shares that has changed hands.

Each exchange tracks its trading volume(s) and provides data to traders and investors for free or a subscription fee. Trade volume numbers are reported as often as once an hour throughout the current trading day, but reported daily and hourly trade volumes are estimates. Daily volume is the most common time frame used when discussing stock volume. Average daily trading volume is the daily volume of shares traded, averaged over a number of days; this smooths out days when trading volume is unusually low or high. Because of this, volume plays a central role in nearly every trading strategy, and there have been countless volume indicators created to help traders interpret volume data. The Forex market is the largest and the most liquid market in the world, with 6 trillion dollars worth of transactions performed on a daily basis.

Check out the four key questions below to help you determine whether a stock can be traded or is better left alone. Continue reading to discover the simple rules we use for ensuring the pre-screened stock picks in our swing trading report always have plenty of liquidity. Asktraders is a free website that is supported by our advertising partners. As such we may earn a commision when you make a purchase after following a link from our website.

Essentially, trading volume can legitimize a security’s price action, which can then aid an investor in their decision to either buy or sell that security. Average daily trading volume (ADTV) is the average number of shares traded within a day in a given stock. Daily volume equates to how many shares are traded each day, but this can be averaged over a number of days to find the average daily volume. Average daily trading volume is an important metric because high or low trading volume attracts different types of traders and investors. Average daily trading volume (ADTV) is a metric used in trading to assess the liquidity and activity level of a security, such as a stock, bond, or commodity.

This, iterated across millions of investors, is the basic principle behind analyzing trading volume. Trading volume is usually higher when the price of a security is changing. News about a company’s financial status, products, or plans, whether positive or negative, will usually result in a temporary increase in the trade volume of its stock.

A holistic decision keeping all factors in mind helps investors go a long way with wealth creation. This helps control risk as you can reduce losses where you want with minimal price slippage. It also makes collecting your profits easier because many other traders will want to take your position (buy from you when you sell) when you are satisfied with your profits. High volume accompanied by sharp price movements against the trend signifies the trend is weakening, and/or is susceptible to a reversal. The average volume statistic shows how many shares change hands in investments on a normal day. Some days will have a much higher volume than normal, while other days see a lower volume.

ADTV is often used alongside technical indicators to gain a more comprehensive understanding of market dynamics. The first trader buys 500 shares of stock ABC and sells 250 shares of XYZ. The other trader sells those 500 shares and buys the 250 shares of stock XYZ to the first trader. https://www.xcritical.in/ The total volume of trade in the market is 750 (500 shares of ABC + 250 XYZ shares). This is because we do not double-count the volume—when trader 1 buys 500 ABC shares from trader 2, only 500 shares are counted. Likewise, only 250 shares of XYZ would be recorded on the volume tally.

Personally, I use TradingView to trade, so that’s the platform I share all of my examples in. That said, all 4 of these indicators are available on a wide range of trading platforms. Last but not least, we also need to learn how to maximize the profits with the Chaikin trading strategy. Simply hide your protective stop loss under the previous pullback’s low. Never use a mental stop loss when volume trading, and always commit an SL right the moment you open your trades. We need to establish the Chaikin trading strategy which is finding where to place our protective stop loss.

However, it’s a different scenario with ETFs (exchange traded funds). To learn more about scaling out of winning trades, check out our educational blog post on exactly how we scaled out of our $TSLA trade for a +118% gain. If you trade a rather large account, then consider an Average Dollar Volume above how to increase your brokerage trading volume 80 million to ensure plenty of liquidity. With all swing trades in the Wagner Daily model portfolio, we typically pre-scan for a minimum Average Dollar Volume of 20 million. If a $100 stock has an ADTV of just 200,000 shares, it would be the same Average Dollar Volume of 20 million ($100 x 200,000).

My favorite volume indicator is OBV, but the MFI gets a lot of attention. You should try both and choose which one best suits your trading style. Since then, his company has turned into a juggernaut in day trading courses, communities, and other resources. While no single indicator is right 100% of the time, the best volume indicator for you is the one that helps you reliably find quality entry and exit points. Day traders aim to join strong moves and avoid moves that show signs of weakness (or look for an entry in the opposite direction of a weak move). The Accumulation/Distribution indicator shows the trend of supply and demand, which is the real driver of stock price movement.

But they also measure trading volume over shorter or longer time frames. For example, you might analyze trading volume over the previous 30 days or year to date. Although, a lot of times, volumes do help us to confirm the existence of a particular trend. When viewed together with price rise or market rise, it can be a helpful indicator.

Therefore, monitor volume and average volume regularly to make sure that the asset still falls within the volume parameters you desire for your trading. Volume of trade or trade volume is measured on stocks, bonds, options contracts, futures contracts, and all types of commodities. The inference is quite clear – high volumes and a price increase confirm that large, influential market participants are positioning themselves to buy the stock. Or as a corollary, whenever you decide to buy, ensure that the volumes are substantial.

If volume picks up upon the break of that consolidation pattern (wedge, triangle, flag, etc), then the volume is confirming a higher chance of a sustainable breakout. By the way, there’s nothing wrong with a trading range market, as long as you can accurately identify the trading range. If you want to skip the training about volume and go straight to the strategy click the table of contents. Here we take a general look at some of the things you should know when looking at volume in the futures market. In this case, just be sure to reduce your share size to compensate for greater price volatility. With an ADTV of nearly 1.1 million shares and an Average Dollar Volume of 69 million, this stock would be considered a highly liquid, “institutional friendly” stock.