Volume is simply the total amount of shares traded for the day, which includes both buy and sell orders. You can determine the daily trading volume on your own — all transactions are publicly available — by calculating the total amount of shares traded.
Illiquid refers to the state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets may also be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset. Additionally, a company may be deemed illiquid if it is unable to obtain the cash necessary to meet debt obligations.
If you see a stock that’s appreciating on high volume, it’s more likely to be a sustainable move. If you see a stock that’s appreciating on low volume, it could be a dead cat bounce. Logically, when more money is moving a stock price, it means there is more demand for that stock. If a small amount of money is moving the stock price, the odds of that move being sustainable are lower. Also, be careful of low-volume (or illiquid) stocks, where you could end up trapped in a pump and dump scheme.
When stock typically has high volume, but volume drops off, it indicates traders are losing interest in the asset (at least temporarily). Similarly, when an asset with typically lower volume sees higher volume, it indicates new interest and activity in the asset.
Every trade occurs at either the bid price or the ask price. The bid price is the highest current price someone is stating they want to buy shares (or contracts) at. The ask price is the lowest current price someone is stating they want to sell shares at. There is always a bid and ask price in an actively traded stock. The bid and ask change as traders buy and sell to each other, or change their minds about what their current bid and/or offer should be. When you decide to buy or sell, you can put out a bid to buy or offer to sell, or you can buy instantly from someone posting an offer, or sell instantly to someone posting a bid.
When a transaction occurs at the bid price, it is known as bid volume.
Bid volume is selling volume because it has the potential to move the price down. Assume someone is bidding 100 shares at $10.01 and someone is also bidding 100 shares at $10.02. When another trader sells 100 shares to the person at $10.02, that bid will disappear, and the new bid will be the lower price of $10.01. The selling volume at the bid lowered the price.
When a transaction occurs at the ask price, it is known as ask volume. Assume someone is offering (Offer and Ask are used interchangeably) 100 shares at $10.01 and someone is also offering 100 shares at $10.02.
When a trader buys 100 shares $10.01, that offer will disappear, and the new offer will be the higher price of $10.02. The buying volume at the offer pushed up the price.
When a market is experiencing more buying volume than selling volume, it means that there are more traders buying at the ask price, which has a tendency to push the price up. When a market is experiencing more selling volume than buying volume, it means that there are more traders selling at the bid price, which has a tendency to push the price down. However, the number of buyers and sellers can change at any moment (and often changes many times even in short time frames), and this is what causes the markets to move in upward and downward waves rather than only in one direction.