One of the factors that most influences the price of shares is the volume of contracts. To the point that it is one of the data that you should look at before opening positions in the financial markets. Not only in connection with equities, but also with those of fixed rent or even alternative options. For many reasons that we are going to expose you in this post so that you can understand it very clearly. Not surprisingly, you can set that a value increases or decreases based on its intensity.
To begin with, trading volume refers to the number of securities traded in a period of time. On the other hand, it is generally calculated as the aggregate of the volume of securities of all securities that are traded on the market. There will be no problem finding it because it comes in all. Specialized media on all trading days. They also impact if they come from large, medium or small listed companies, as can be seen from now on.
According to Self Bank, “the volume of contracts indicates the interest of investors in a specific action. Considering the average volume, there are securities of which millions of securities are traded per day, while we can find others of which barely a few thousand are traded ”. This is something very interesting that you should analyze before deciding on one or another security or financial asset. Because in fact, it can give you some other sign on what you can find when you start investing. And therefore, it is convenient not to detract from this very relevant aspect that we are talking about.
Contract volume: negotiation
Based on this general scenario, the Spanish Stock Market traded a total of 54,023 million euros in equities in the last month. Or what is the same, 54.5% more than the previous month. On the contrary, the number of negotiations in the month it was 4.3 million, 45.2% more than in the previous period.
On the other hand, the Financial Derivatives market has increased the trading of Futures on IBEX 35 and Futures and Options on Mini IBEX by 27.7%, 44.6% and 19.2%, respectively, compared to the previous month. In the accumulated of the year there is an increase in the volume traded in the Futures on IBEX 35 3.6%. The open position in Stock Futures and Stock Options increases from the previous month by 27.3% and 9.3%, respectively.
In fixed income
Regarding fixed income, the volume traded in the analyzed month grew no more than 106.6%, compared to the same period of the previous year, due to the contracting of public debt assets. The respective increase to the first ten months of the year stands at 46.5%. Although on the contrary, the amount of the new issues incorporated to negotiation in the MARF reached 762 million euros, which represents an increase of 65.5% compared to the same month of the previous year.
The accumulated volume At the end of the first ten months of the year it was 5,168 million euros, an increase of 50.1%. The outstanding volume in circulation in this market reaches 3,306 million euros, that is, with an estimated growth of 40.7%. These data make it fundamentally important that great relevance be given to these important stock market parameters. More than others with whom you are used to operating in the realization of investments, beyond other technical considerations and perhaps even from the fundamental point of view.
Holidays on the Spanish Stock Exchange
To pay attention to what the trading volume represents, holidays in Spanish equities will be of special relevance. To this end, BME, which integrates, among other companies, the four Spanish stock exchanges, the Options and futures market (MEFF) and the AIAF Fixed Income market, has set the calendar of sessions for 2019, agreeing to consider non-business days for operation purposes:
- Tuesday January 1
- Friday April 19
- Monday, 22 April
- Wednesday, May 1st
- Wednesday December 25
- Thursday December 26
In general, they coincide with the calendar proposed by the international financial markets since there is an important synchronicity in all of them. Remember there are some festive parties where equities do not close, both nationally and outside our borders. And this point can lead you to make the odd mistake in your operations on the stock market. As it will have happened to you on more than one occasion in the previous exercises. This is exactly why it will be necessary for you to take into account the national equity calendar.
Very high volumes
On the other hand, the volume of contracts is very relevant when it is fundamentally high, it is because there is a special interest on the part of investors to open positions in the security in question. In general, it coincides with bullish positions, that is, if there is a rise in prices with a high trading volume, it means that there may be a continuation in the uptrend. Also in the opposite direction, which indicates that the descents have a lot of consistency. For this purpose, it is very important to analyze this relevant data to show what the continuity of the value may be in the coming days or even weeks.
On the other hand, a notable increase in the volume of contracts reveals that something very important is happening in the security in question. Something not very common and that warns that you should be aware of a exceptional situation. This happens relatively frequently with small- and mid-cap stocks emerging from one trading session to the next with truly abnormal trading in the financial markets. It can indicate that the rises or falls of its price can be very intense from those moments. Beyond other technical considerations and perhaps also from the point of view of its fundamental principles.
Mark the interest of investors
The contracting volume, on the other hand, constitutes a very reliable thermometer on the interest that small and medium investors have at any given time. Both in one sense and another, or what is the same, they show the intentions to compare or market them. For this purpose, it is a very reliable parameter that does not require a very deep knowledge of the financial markets. Just be attentive to movements that occur in the equity markets or other financial assets where you are positioned at all times.
It is true that the trading volume is not always the same, but they differ from one trading session to another. These actions are totally normal and logical to occur, but the exceptional thing is that the volume changes abruptly. When this happens what it is telling you is that something important is happening with the value. It can be due to different causes or reasons and that are of a different nature. From a greater interest on the part of small and medium investors to the entry of a large investment fund in the analyzed value. This is the biggest problem you have to analyze the typology of these movements.
Accompany the movements
An investment strategy that you can use from now on is to follow the market trend. In other words, when you see appreciation in the price of stocks with excessively high trading volume, it should be the expected signal to open positions, including through aggressive purchases of financial assets. And in the opposite direction, totally the same, that is, closing positions before the opportunity that the falls intensify in the coming days or weeks. It is a fairly reliable stock because these movements in financial markets are rarely wrong.
On the other hand, you should not confuse them with rebound performances and the interest on the part of investors grows progressively. But as a reaction to a series of decreases that have occurred and have put the value in a very desirable situation due to the very competitive prices that it presents at that precise moment. As you may have seen, these are two substantially different movements that require completely opposite investment treatments from all points of view. The key to successful operations lies in not confusing them.
Finally, the volume of recruitment has much more relevance and value than you think from the beginning. To the point that it can give you the entry and exit guidelines in a certain financial asset, whatever it is. So that in this way you are in better conditions to make your operations profitable in the financial markets. At the same time being a powerful weapon to protect your positions from any type of strategy. Whatever the case, the key to successful operations lies in not confusing them.