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Stock Commentary

What’s the difference between volume and value, and how do you use this information?

Merkado Barkada
Whatâs the difference between volume and value, and how do you use this information?

When you see stock market data, along with all the “high”, “low”, and “close” data relating to the price, you’ll also see a “volume” and “value” metric.

The PSE website only shows the value metric on its summary “Most Active/Advances/Declines” pages, but if you click an individual stock you’ll see the rest, including “volume”.

The “volume” number is the total number of shares traded in that stock in one day.

The “value” number is the total amount of money spent to buy all of the shares that were traded.

“Volume turnover” expresses the day’s volume relative to the total outstanding shares of the stock.

How you use this data probably depends most on your investment time horizon (volume/value data is less important the longer you plan to hold a stock), and your investment strategy (volume/value data is more important to traders getting in and out of positions quickly, or that use these metrics as indicators for technical strategies).

As a long-term trader, I tend to stick to stocks that have enough volume that I can enter and exit my positions without too much difficulty, on almost any given day.

I tend to shy away from stocks where my average starting position might represent an uncomfortable portion of that stock’s daily volume, or where volume turnover feels high. As a long-term investor, I like to enter quiet stocks that are well traded enough to allow for graceful entrances.

MB BOTTOM-LINE

Stock trading is all about statistics. I mean, primarily, it’s about trying to make money, but the point is that there is no “one way” to make money on the stock market, and that’s why there are so many different statistics that get published.

Being a successful trader doesn’t require mastery of all the statistics; it requires using a strategy to make money over time.

You only need a working knowledge of the statistics that your strategy uses to give yourself a chance to be successful.

Mastery comes with time and experience, but if you do this long enough, you’ll realize that things are always slightly changing such that mastery becomes much more of this aspirational asymptote than a real thing that you can achieve. The key for me, as an investor, is to learn as much as possible while doing over and over again the little steps that give me positive trades.

Sometimes that means avoiding FOMO (fear of missing out), sometimes that means learning about some new statistics to help refine my current strategy, sometimes that means remembering the best practices that got me here (like setting my stops and limiting my risk), and sometimes that means doing additional research on topics that relate to my current investment time-frame and strategy. 

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Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

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