Using Volume for Day Trading Stocks

Thu May 21, 2020, 01:41 pm | by Delaney | No comments

Volume is an important indicator for day traders, and it relates to how many shares of a particular stock is traded for a given time period. This helps traders understand how liquid the stock is, which is important for day traders who may need to get in and out of a trade quickly. This blog post will breakdown volume, its importance for day trading, a few ways to measure volume, and how to find it inside Benzinga Pro.

What is Volume in Day Trading? 

According to Investopedia, volume is the amount of shares a security is traded over the selected period of time. For example, at this time of this blog post, Apple’s session volume is 9.716 million. That means for the session up to that point, 9.716 million shares of Apple were traded. Generally speaking, the higher the volume, the more liquid the stock. 

Using Volume for Day Trading 

Volume is used in technical analysis as a measure of the significance of the market movement. Higher volume generally means more interest in the stock, while lower volume generally means less interest in the stock. It can confirm trends and chat patterns. 

Read More: Beginner’s Guide to Technical Analysis

Day traders usually want to stick with higher volume stocks, because that means there is more price movement. This is because day traders need to make sure they can enter and exit trades quickly. It is recommended that day traders look for stocks with at least one million in volume. Higher volume also means it’s easier to buy and sell stocks because more people looking to buy or sell.

In a chart, you will typically find a volume bar chart at the bottom, as seen below.

Screenshot of Apple's chart

A red bar means that price declined in the given time period, and a green bar means price increased in the given time period. 

Day Trading Volume Data and Indicators

Volume data may be reported once per hour, although these are estimates. The true volume of the trading day is reported the next day. Below are a few variations on volume and indicators.

Relative Volume 

Volume can change from day to day, so the relative or average volume data will give you the average volume for a “normal” day. This takes the current volume for the period selected compared to the average volume for that stock.

Higher-Than-Average Volume 

When volume is higher than average, that typically means something is happening to the stock that is causing price movement. This volatility means there could be an opportunity for you to make a day trade. 

Pullbacks

A pullback is a correction that occurs when a stock has lower than average volume and prices move toward support levels. 

Trend Confirmation 

Pay attention to the correlation between price and volume. Rising price and volume show buyer enthusiasm while rising price and decreasing volume show a lack of buyer enthusiasm (and possibly a potential reversal). 

Finding Volume in Benzinga Pro 

Screenshot of the Details, Signals and Screener tool in Benzinga Pro

Details

The quickest way to find the session or 100-day average volume for a stock is in the Details tool. Open the tool up, and scroll down past the news. Under Quotes, you’ll find the Session Volume and Average Volume (100 Day).

Unusual Options Activity Calendar

In our premium unusual options activity calendar, you can filter by volume and volume/open interest. To do this, open the Calendar tool, select the Unusual Options Activity calendar, and click the Filters tab on the right side. From here, you can choose how you’d like to filter the tool by volume. Unusual Options Activity data is an additional add-on to your subscription, but you can try it free with a Benzinga Pro trial.

Watchlists and Movers

Similarly to the Unusual Options Activity Calendar, you can also filter your Watchlists and Movers tool by volume. Select the Filters tab on the right side and filter the tool by volume.

Signals

In the Signals tool, you can filter any of the Signals by the average 14-day volume. Select Filters from the top menu, then scroll down to Average Volume (14 Day).

Screener

The Screener tool is the most robust tool to search for volume. In the filters section, you can use:

  • Volume (1 minute, 1 day or 1 week, depending on what is selected in the upper right corner)
  • Relative Volume
  • Average Volume 10 Days
  • Average Volume 30 Days
  • Average Volume 60 Days
  • Average Volume 90 Days

If you haven’t yet, start your free trial of Benzinga Pro to find stock volume.

Final Thoughts

Volume is an important concept to understand when day trading. In general, day traders want to look for stocks that have high volume. Increasing volume and price generally mean buyer interest, making the stock more liquid, and easier and quicker to buy and sell. There are multiple ways to measure volume, including the selected time period, session, relative volume, and over a selected period of days.

Disclaimer: Benzinga is a news organization and does not provide financial advice and does not issue stock recommendations or offers to buy stock or sell any security. Benzinga Pro is for informational purposes and should not be viewed as recommendations. Benzinga Pro will never tell you whether to buy or sell a stock. It will only inform your trading decisions. You can find our full disclaimer located here.