Trading stocks with higher trading volume creates opportunities and risks. When a stock has a surge in trading activity, something of great significance is happening, such as positive news or shifts in market sentiment. For instance, volume shockers nse are stocks whose trading activity has moved out of their daily volumes. Again, this may make them exciting and risky for traders or investors. Focusing on these volume shockers, you might be able to pick up on a few opportunities amidst all the chaos and improve your trading decisions.
Know the top tips for trading stocks with higher trading volume
Here are five major points to help you deal efficiently in such stocks for better execution and correct decision-making.
Monitor liquidity
Such stocks enjoy far greater liquidity, which enables one to sell or buy their shares without influencing the stock price too much. This is important because it’s going to let you in and out of trades without more slippage. The difference between what you expect to pay and what you end up paying the price. If the volume keeps coming in consistently high, that is normally an indicator that the stock is actively trading, and you won’t have major liquidity problems.
Watch for market orders
A market order initiates with purchasing or selling a stock immediately at the current market price. So, it is important in fast-moving markets where one wants to quickly get in or out of a trade. The spreads between the bid and the ask for high-volume trading stocks are tight. Thus, such a market order can be enabled efficiently between the buy and sell prices. Be careful in highly volatile situations where even high-volume stocks can drop prices without notice.
Follow trends with confidence
Typically, growing trading volume confirms that there is strength behind a price trend. For example, if the security trend is up or down with increasing volume, it usually means considerable support behind the price action. This trend confirmation may help increase your confidence in trading decisions because it will indicate that the price action is backed by substantial trading activity. Nonetheless, watch out for fake breakouts or trend reversals.
Use technical analysis tools
Technical analysis tools could give clearer signals on stocks with higher trading volumes. This will be through tools such as moving averages, volume charts, and RSI, which help a person understand movements in price better. For example, the moving average crossover in a high-volume stock is likely to be more reliable compared to when occurring in a stock with low volume. However, do not merely rely on technical indicators.
Stay current with news and events
High-volume trading stocks are often more sensitive to news and market events. Large news, earnings reports, or other important macroeconomic events may result in sudden spikes in trading volume. Staying up-to-date on those events can help you be prepared for the potential moves. Always be on the lookout for heightened key news releases. Even in the case of high-volume stocks, rapid price changes can occur due to an outbreak of unexpected news.
Final words
To sum up, you will trade stocks with an average daily volume. Being informed and disciplined in the share market is the greatest way to lift your trading success. The vision at 5paisa is to empower every investor in their wealth creation journey with a simple, fast, and affordable product. They keep honest pricing with no hidden fees and hassle-free investing.
