In trading stocks or any securities Trading volume (Trading volume) is one of the important indicators. An asset's high and low trading volume over a period of time can indicate whether the asset's price movement trend will continue or not.

One way to find a stock's trading volume is to use a formula. Turnover activities (TVA). Following is the discussion:

Understanding Trading Volume Activity (TVA)

Trading volume activity (TVA) is a formula used to calculate the total trading volume of a stock over a period of time. Compare with the number of stocks circulating in the market during that time.

Sutrisno, In his book published in 2000 Trade volume activity is defined as the total value of stock trading transactions. Both sales and purchases made by investors are in rupiah.

Benefits of calculating turnover activity

1. Liquidity measurement

Liquidity is Measuring the ease of trading investment instruments This means that if you want to buy shares It will be easy to get. While if you need cash These assets will be easier to sell.

Simply put, if it's the average Trading volume activity (TVA) of the stock is quite high. This means you can earn and sell more easily. This is, of course, different from the undervalued TVA stock. No matter how cheap you sell it. There will be a small number of buyers interested in these assets.

2. Know the indications of price trend movements.

If the trading volume of the asset is high This means that the trend is likely to continue. If the trading volume of the asset starts to decrease This means that the ongoing price trend has a chance of reversing.

For example, the price trend of a stock is up with high trading volume. This means that the uptrend will continue for some time. On the other hand, if at some point the stock's trading volume starts to decline, The uptrend has a chance of reversing. (Downward reversal)

3. Know the price sensitivity to certain events.

Changes in stock prices can also be caused by certain events. So if you want to know the impact of an event on the future stock price, you can calculate the event's impact on the value. Trading volume activity these stocks

For example, you want to know the possible changes in the price of FMCG stock A, which operates in the FMCG sector, during Eid. Therefore, you can take the price and trading volume change data of these securities during Eid over the last 10 years. passed by

Assuming that the average trading volume change of Stock A after Eid increases +10% and the price increases +8%, it can be concluded that by Eid next year The share price of this company will increase by at least 8% while the trading volume will increase by 10%. This way, before Eid arrives you will be ready to buy these stocks.

4. Choose the right stocks

Investors and traders generally choose stocks that have sufficient liquidity. This is because stocks with low liquidity or low daily trading volumes It's harder to sell when it's necessary.

Liquidity, on the other hand, is like a trader's trading profits. Day Trader You can choose stocks that have relatively high daily trading volumes. Swing traders, on the other hand, choose securities that do not have as high daily liquidity as day traders but are attractive enough to own in just a few weeks.

Formula and method for calculating trading volume activity (TVA)

The formula for calculating trading volume activity is quite simple. Namely:

Total activity volume = Number of A shares traded on date t: Number of A shares circulating in the market.

For example, the number of A shares traded on Monday, April 15, 2024 is 500,000, while the number of Company A shares in circulation is 1 billion. Therefore, the investment instrument's TVA is 0.0005, which means it is only 0.0005. or 0.05% of all A shares traded that day

And if there are many days of analysis? (Not just for one day)? So the formula is:

Total activity volume = Number of A shares traded during a period: Number of A shares circulating in the market.

For example, during the period 15-19 April 2024, the trading volume of Share A is equal to

date Total trading volume
April 15, 2024 500,000
April 16, 2024 870,000
April 17, 2024 440,000
April 18, 2024 987,000
April 19, 2024 370,000
all 3,167,000
Turnover activities

If the number of shares outstanding is 1 billion, the TVA value of Share A is 0.003167, which means that only about 0.31% of Share A trades in 1 week. Want to know if this value is good? You need to compare the TVA value of this stock with the TVA of other companies operating in the same industry and/or across the stock market.

How can I find trading volume information?

You can view daily trading volume information for each stock at Trading applications that you use. Normally you just type the name of the company you want in the search box. Then click the menu historical information For these stocks, on the right side of the table there is information about their daily trading volume.

to count Total activity volume (TVA) You can then download trading data for the time period you want. Then add and divide by the number of relevant stocks circulating in the market. For the number of stocks circulating in the market You can view the information in each issuer's profile section.

Difference between trading volume activity and average daily trading volume (ADTV).

Both use trading volume data and are useful in calculating stock liquidity. Trading volume activity (TVA) is different from Average daily trading volume (ADTV). The difference lies in the calculation formula and how it is interpreted.

TVA is calculated by adding the volume of shares traded over a period of time by the number of shares outstanding. The result can be interpreted as “Stock A trades only x or x% during period y” temporarily. Average daily trading volume It is calculated by adding the volume of shares traded in a period by the number of days in that period. The results can be interpreted as “The average number of A shares traded over a period of time.”

Source link


Please enter your comment!
Please enter your name here