What Does High Volume Trading Indicate?
High trading volume means there is greater market interest in a stock, which makes for higher liquidity. Large-cap stocks, for example, are considered to be very liquid because their trading volume is high, and the price buyers are willing to pay, which is known as the bid, is close to the price a seller will accept, known as the ask.
What Does Low Trading Volume Indicate?
Low-volume stocks like small-caps are traded more infrequently than larger-cap companies and sometimes trade on smaller, less-liquid exchanges. They are characterized by low volume as well as low liquidity. This means that the price per share a buyer offers could be very different than the price a seller will accept. The difference between a stock’s bid and ask prices is known as its spread, and stocks with lower volume tend to have larger spreads. When this type of stock experiences a surge in demand, it can also experience a lot of volatility. Thus, low volume is a risk associated with smaller market-cap companies.