#Definition
Volume represents the total activity in a market. It is usually measured in:
- Notional Volume: Total dollar value of trades (e.g., "$1M traded").
- Share Volume: Total number of shares/contracts traded.
#Significance
- Liquidity Indicator: High volume often (but not always) implies higher liquidity and tighter spreads.
- Interest: High volume indicates strong trader interest and information flow.
- Validity: A market with $10M volume is generally considered a more reliable probability signal than one with $10 volume.
#Volume vs. Open Interest
- Volume: Cumulative flow (how much traded). Resets or accumulates over time.
- Open Interest: Stock (how many contracts exist right now).