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PaperclipPerfector  6mo ago (text post)   2052 thread views

Small-Scale Question Sunday for October 8, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

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I have a silly question about the stock market and what is meant by volume.

In my neophytic understanding, volume in the market is the number of trades taking place. Many traders pay careful attention to volume before making trades.

My question is in the age of algortihms and ai, isn't volume immensely pliable?

Why can't an A.I. make a million one dollar trades instead of one million dollar trade? Andnif they do so, won't that impact "volume" a million times more?

Maybe I fundamentally misunderstand the concept of market volume. Is it the number of agents trading or the number of trades made? And either way, wouldn't an army of a.i. trader easily manipulate volume, if possible, to their advantage?

It counts number of shares traded. Doesn't matter how many agents were involved, or how they listed their orders. When lots of shares are changing hands, that normally represents a strong belief.

There are numerous ways to abuse this. If the buyer and seller are actually the same entity, shares aren't really changing hands, and it's a wash. In market ramping, large purchases or sales actually occur, but it's intended to bait other investors into moving the price, then capitalizing on that movement. Another option is just faking intent to trade.

These are all more or less illegal under the general category of "market manipulation." The SEC (and its non-American equivalents) really frown on such behavior.

Volume is the number of eg shares traded, not the number of individual ‘trades’. The volume of shares traded in your two examples would be the same. You can find out the number of trades (ie number of buy and sell orders) for a security over a given period, for example, but this is not the same as the volume.

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