Market volume – definition and example
Market volume refers to the total amount of transactions that traders conducted in a specific market. We calculate the total volume of transactions over a specific period such as a day, month, quarter, or year. The count of total volume comprises each transaction between sellers and buyers, i.e., traders.
In the world of stock exchanges, the stock market volume is the total number of shares that people traded each day. We also call this the ‘trading volume.’
Stock markets are places where people buy and sell company shares. The New York Stock Exchange and the London Stock Exchange, for example, are famous stock markets.
Given that for each purchaser there is a seller, trading volume in a stock market, for example, equals half the number of shares transacted. In other words, if John sells 1,000 shares to Mary, and Mary purchases 1,000 shares from John, market volume is 1,000.
Market volume – sources
We can obtain data regarding market volumes from primary as well as secondary sources.
Organized exchanges and markets, for example, are primary sources. Secondary sources, on the other hand, include research organizations, retailers, and surveys.
Market volume and penetration rate
Penetration rate refers to the percentage of the relevant population in a study that has bought a brand at least once. Studies always look at penetration rates over a specific period such as a day, quarter, etc.
If we multiply our number of target customers by the penetration rate, we get the overall market potential. In this context, market potential means the potential market volume.
Let’s look at a fictitious example. XYZ Inc. has 1,500 target customers for AAA. AAA is its new product. Let’s suppose AAA’s penetration rate is 65%. We calculate the potential volume as follows:
1,500 x 65% = 975
Market volume vs. market value
As soon as we know what the volume of the market is, calculating its monetary value is easy.
We calculate market value by multiplying market volume by the price of each unit.
Let’s assume that each unit of AAA sells for $1 million. To calculate the monetary market value, we make the following calculation:
975 buyers x $1 million = $975 million