High volume is generally associated with which of the following?

Prepare for the CMT Level 2 Exam with our quiz. Study with flashcards and multiple choice questions, each with hints and explanations. Get ready to excel on your path to becoming a Chartered Market Technician!

High volume is generally seen as a strong indicator of market activity and can often signify considerable interest in a security or market segment. When trading volume is high, it suggests that numerous market participants are buying and selling, which can lead to larger price swings. This increased activity can be a sign of heightened volatility, as prices may change rapidly in response to the influx of orders.

In a high-volume environment, market participants are likely reacting to news, earnings reports, or significant market events. This can lead to sharp price movements, which entails a higher risk for traders and investors, as the potential for losses may increase alongside the opportunities for gains. Thus, high volume is typically associated with both high risk and high volatility, making the choice of high risk and high volatility the most accurate in this context.

Other options, such as low risk or stable markets, do not adequately capture the nature of high-volume trading, as these conditions often coincide with lower activity and price stability. Similarly, while high volume may support consistent trend movements, it does not guarantee them, thus making it less relevant in this particular context.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy