What is the correlation between volume and stock price? Let's say someone bought $10,000,000 dollars worth of a 10$ stock and the volume spiked. Does that in turn bump the stock price?
Volume = the number of transactions that were made.
Stock price = moves based on supply and demand.
In short there really is no correlation between volume and the price of the stock. A stock can go up on high volume or go down on high volume.
The reason people see volume as important is because it shows how strong a move is. If a stock goes up on high volume it means it is an important move because a lot of people where buying the stock. If it goes up on low volume it is less important because even though it went up not a lot of people where trading the stock.
It’s kind of like conducting a survey. If you asked 10 people a yes or no question the outcome is not as important as if you had surveyed 1,000 people the same yes or no question.
