Highest-Volume Stocks
- The more shares a company has outstanding, the more likely its stock is to have a high daily trading volume. For example, General Electric has over 10 billion shares outstanding, so its daily trading volume is in the tens of millions of shares. By comparison, the small-cap Mistras Group only has 26 million shares outstanding, so its daily trading volume is between 50,000 and 100,000 shares.
- Many investment sites such as Yahoo! Finance list the highest-volume stocks daily. Clearly, the larger a company, the more likely its stock is to make the daily high-volume list, but even the highest-volume stocks can have unusual volume spikes on a particular day.
- If you multiply a stock price by its daily volume, you get the total dollar amount of the transactions. The higher the dollar amount, the more money is at stake. High-volume stocks show substantial commitment and interest on the part of institutional and retail investors.
- It is generally safer to trade high-volume stocks. A high volume of trading makes a stock more liquid -- easier to buy and sell -- and the stock price more stable. If investors are willing to pay a particular price for hundreds of thousands of shares of stock, it means they accept the price as fair and valid. If a stock only trades a few hundred or thousand shares at a particular price, that price is much less stable because a small increase or decrease in the available supply may significantly affect it.
- A high volume by itself is less important than volume spikes. A substantial increase in daily volume, accompanied by a big price change, signifies a major development and may signal the beginning of a major move.