Have you checked your volume lately?

We all know what volume is right? Well, a basic definition for those of you that don’t actually know what volume is in the stock market.

-Volume is defined as the amount of shares traded.

You can easily look up the volume of shares traded on any stock on virtually any stock market quote site, or even your own broker’s website. Usually you can check the volume for at least that day, more common though you can chart volume going back 10 years or more if needed.

Now, for the smart/wealthy stock trader, volume is a BIG deal.

I know for my trading, volume is very critical.

But what kind of volume am I looking for?

Well, first and foremost, I will look at the “heavy hitters”, the stocks that are showing high volume/much higher than the average volume especially. Ideally if I can get it, I want recent big volume, and a good move in the direction I want to trade (short/long).

I will also take a good solid average volume (1,000,000+ shares/day), and take a better look at the price action, etc.

The point is, I want good volume, period.

Unless I have found remarkable information about a stock trading less than 100,000 shares/day on average, I would NEVER even consider looking at a stock with such low volume. No volume, means no one is buying. It’s rarely a wrong move to avoid very low volume stocks.

Obviously, less volume also means less liquidity on the stock. This means, you are less likely to get the price you want on a lower volume stock which could blow your trade completely.

For a past example of what kind of volume I am looking for, I want you to look up the symbol CWTR (Coldwater Creek, Inc.) This is a Nasdaq traded stock that I initially pin pointed on August 10, 2006. You notice the price move was +1.91, with almost 2 millions shares traded that day. It had been trading just over, or just under the 1 million shares/day mark for the past while, but it especially looked interesting that day, with the volume higher, and the price moving up so well. Certainly got my attention.

Then on August 23, and 24 2006, you see the volume spike on both days to well over 9 million shares per day! Add that with a nice Gap to the upside and this volume strategy works out better than expected.

Although you get that huge spike on those 2 days, overall the trade had been working out very good anyway. Just because the volume was better than normal, and the price action confirmed where the stock was heading.

Jessi Johnson www.freestocktradingsecrets.com

Jessi Johnson is the author of the Secrets of Millionaire Stock Traders, a free program which you can gain access to by visiting http://www.freestocktradingsecrets.com