One of the factors that most influences the price of equity securities 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 relation to equities, but also to those of fixed rent or even from alternative options. For many reasons that we are going to expose in this article so that you can understand it very clearly. Not surprisingly, you can determine that a value rises or falls based on its intensity.
To begin with, the trading volume refers to the number of securities traded in a period of time. On the other hand, it is usually calculated as the aggregate of the volume of securities of all the securities that are traded in the market. There will be no problem to meet him because he comes in all specialized media on all trading days. They also affect whether they come from large, medium or small listed companies, as you can see 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 titles are traded per day, while we can find others of which barely a few hundred are traded ”. This is something very interesting that you should analyze before opting for one or another security or financial asset. Because indeed, it can give you some other sign on what you can find when you start the investment. And therefore, it is convenient not to detract from this very relevant aspect that we are talking about.
Contract volume: negotiation
From this general scenario, the Spanish stock market traded in equities a total of 54.023 million euros 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 trading in Futures on IBEX 35 and Futures and Options on Mini IBEX by 27,7%, 44,6% and 19,2%, respectively, compared to what was traded in 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 increases in Stock Futures and Stock Options compared to the previous month by 27,3% and 9,3%, respectively.
In fixed income
Regarding fixed income, the volume traded in the analyzed month grew by no more than 106,6%, compared to the same period last year, due to the contracting of public debt assets. The increase corresponding to the first ten months of the year stands at 46,5%. While 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.
El 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 to say, with an estimated growth of 40,7%. These data make it especially important that great importance must 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 maybe even from the fundamental point of view.
Holidays in the Spanish stock market
In order to take into account what the trading volume represents, public holidays in Spanish equities will be of special importance. In this sense, 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 the year 2019, agreeing to consider non-working days for the purposes of operation:
- Tuesday, January 1
- Friday, April 19
- Monday, April 22
- Wednesday, May 1
- Wednesday, December 25
- Thursday, December 26
They generally coincide with the calendar proposed by the international financial markets since there is an important synchronicity in all of them. Remember that there are some festive parties where the variable income does not close, both national 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 past exercises. For this precise reason it will be necessary for you to take into account the calendar of national equities.
Very high volumes
On the other hand, the volume of contracts is very relevant when it is especially high, it is because there is a special interest on the part of investors to open positions in the market value in question. It generally 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, indicating that the descents have a lot of consistency. In this sense, 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 striking increase in the volume of contracts reveals that something very important is taking place in the security in question. Something not very frequent and that warns that you must be aware of a exceptional situation. This happens relatively frequently with small and mid-cap stocks that emerge from one trading session to the next with a truly abnormal trading in the financial markets. It can indicate that the rises or falls in its price can be very intense from those moments. Beyond other technical considerations and maybe also from the point of view of its fundamentals.
Mark the interest of investors
The volume of contracting, on the other hand, is constituted in a very reliable thermometer on the interest that small and medium investors have at any given time. Both in one sense and the other, or what is the same, show the comparing or selling intentions of the same. In this sense, it is a very reliable parameter that does not require very deep knowledge of financial markets. Just be attentive to the 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 completely normal and logical to occur, but the exceptional thing is that 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 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. That is, when you see appreciations in the price of stocks with an excessively high volume of trading, it should be the expected signal to open positions, even through aggressive purchases of financial assets. And in the opposite direction, completely the same, that is, to close positions before the possibility that the falls intensify in the coming days or weeks. It is a fairly reliable action because these movements in financial markets are rarely wrong.
On the other hand, you should not confuse them with rebounding 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 highly desired situation due to the very competitive prices that it shows at that precise moment. As you may have seen, these are two substantially different movements that require investment treatments that are completely opposite from all points of view. The key to successful operations lies in not confusing them.
In summary, the volume of recruitment has much more importance and value than you may think from the beginning. To the point that it can give you the entry and exit guidelines in a certain financial asset, whatever it was. So that in this way, you are in better conditions to make your operations profitable in the financial markets. In addition to being a powerful weapon to protect your positions from any kind of strategy. In any case, the key to successful operations lies in not confusing them.