Understand what is traded value in stock market: While an individual is involved in the stock market, there are various factors that he/she should consider while trading or investing in a share. One such important factor is the liquidity of the stocks.
This liquidity of the stocks can be found by individuals using volumes and traded value. While many of you might have heard about volumes in the stock market, you might not have come across the concept of traded value.
In this article, we will be discussing what is traded value in stock market and the benefits of using the traded value in the stock market
What are Trade Volumes?
Before understanding what is traded value in stock market, it is important to understand what is volumes in the stock market.
Volumes can be defined as the total number of shares that can be bought and sold for a specific period of time. It helps the investors understand the existing sentiment in the market.
The volumes can be plotted depending on the time period chosen by the individual. The volumes can be taken on a minute basis, hourly basis, daily basis, and so on.
Where can you find volumes?
The volumes of the stocks are tracked by all the exchanges and can be easily accessed by individuals for whichever stocks they like.
Individuals can also know the trading volumes through your broker’s platform, websites, or through third–party websites that upload information related to the stock market. It can also be found on the website of NSE.
What is Traded Value?
Now that we have understood what is volumes, it will be easier to understand what is traded value in stock market.
Traded value is calculated by multiplying the total volumes by the price of the share during a specific period of time. Just like trading volumes, they can be measured based on the time preference of the individuals. But, it is preferably considered on a daily basis.
Example of Traded Value
Let us understand more clearly what is traded value in stock market with the help of an example:
Suppose shares of company X are bought and sold at different prices during the day, this is how the traded value of the company will be calculated:
|Buy/Sell transactions During the Day
|Total Traded Value
Benefits of using Traded Value
The traded value can be beneficial to the individuals on a long-term basis:
- The traded value won’t make much difference to the traders on short time spans. It gives a clearer picture to the individuals on a longer time horizon because though the volume remains the same, there will be an increase or decrease in the traded value.
- Another benefit of traded value is, that it automatically handles situations like a split or bonus on the counter. Ex: assume that the price of the stock fell from Rs 200 to Rs 100 after the 1:1 bonus issue.
Since the price of the shares has doubled, the value of the shares will also be divided by two. This way an increase in the volume will be considered normal. Traded value is useful in understanding the normalcy of a situation.
In this article, we discussed volumes and where to find them, what is traded value in the stock market along with an example, and also the benefit of traded value.
Traded values is a very useful data for investing and trading. Individuals can use traded value to identify stocks that are prone to manipulation and they can also use it to identify the psychology of the market.
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