What does 'trading volume' refer to in currency exchange?

Trading volume in currency exchange refers to the total quantity of currency that is traded within a specified period. This metric is crucial for understanding the level of activity in the market, as it indicates the liquidity and the overall interest in a particular currency pair. A higher trading volume generally signifies a more liquid market, where it is easier to execute trades without causing significant price changes.

This measure provides insights into market trends and helps traders make informed decisions. When analyzing the trading volume, traders can gauge the strength of a price movement, as increased volume often accompanies significant price changes, suggesting that the movement is backed by solid interest among market participants. Understanding trading volume is essential for anyone participating in the currency exchange market, as it plays a crucial role in market dynamics and trading strategies.