What if a stock has a very low volume, on some days does it not trade at all?

The topic of this article is what it means if a stock has a very low volume. This does not mean necessarily that on some days the stock does not trade at all, but it does mean that the average numbers of trades made every day on a certain stock over a certain period of time is low. So there might be days when the stock is not traded at all, but at the same time, having a low volume does not necessarily mean absolutely no trading has occurred. Low trading just means that very little trading has occurred.

Some people describe stock chart volume as really a measure of the emotionability of a stock. Are people excited about it? If there is a lot of excitement over a stock, for one reason or another, then a lot of people are going to be trading it, and so it will have a high volume. If the stock is not particularly exciting, and people are not getting worked up about it, then it will have a low volume. Stocks might have a high volume because there is something in the air-some people know that something big is going to happen, whether it's a merger or a major sale or if a company is expected to post major revenue increases, or decreases. Some stocks also are just sexier than other stocks are-like Google, for instance. Google is going to have a higher stock chart volume than, say, maybe your average steel mill will have most of the time.

Another thing that stock chart volume is is that is a calculation and a representation of the liquidity of a stock. And so what is liquidity? Liquidity is just a demonstration or referral of how easy it is to get a stock and then to sell it. Low volume stocks have a low liquidity. Let's think through this just using common sense. If liquidity measures how easy it is to buy and then to sell a stock, but nobody is interested in buying or selling stocks that have a low volume, then the connection would be that if a stock has low liquidity, then it also has low volume, and it's hard to either get a hold of the stock or to get rid of it. The term for stocks with low volume is illiquid. Liquid stocks are high volume, because there are a lot of people trading the stock around.

One thing that low volume does not means is that low volume stocks only have people who want to sell the stock instead of buy. Conversely, then, high volume stocks would be ones where people only want to buy instead of sell. This is not true. There will always be someone to sell and someone to buy. Low volume just means that people are not particularly interested in buying or in selling a particular stock.

So what does low stock volume have to do with you and why would you want to know about high or low stock volume? The highness or lowness of stock volume is important with you combine it with the price of a stock. So let's say that a stock is just sort of sitting there in a narrow volume range when you look at a stock chart that has volume on it. Then suddenly the stock swings up on the chart, increasing in both its range and its volume. You can then reasonably conclude that since there is greater interest in the stock, resulting in greater volume, then the price of the stock will also go higher.

Another term that you should know is "churning." A stock is said to be churning if it has high volume but a narrow range. This means that a lot of people are either buying-accumulating-or selling-distributing. Generally speaking, you should remember that price is the most important indicator when you are looking at a stock chart. But volume can help you project what the price is going to do. If a stock shows a sharp increase in volume, that means that something is going to happen-either the price will drop or the price will go up. It's up to you to figure out which direction it's going to go and what you should do about it.