The active trading volume gives you a strong understanding of the liquidity and the market sentiment surrounding a stock. If the trading volumes are low, it can become difficult to exit the stock as and when you wish. Lower trading volumes also produce sharp price movements. \r\rInvestors should use a 14-day average to get a fair idea of the liquidity a stock presents. Many investors also use trading volumes to identify the momentum or direction in which a stock might move. An uptick in volume and price indicates a positive momentum, whereas an uptick in price with low volumes may indicate stock manipulation. Long-term investors with a passive portfolio management approach should ideally avoid illiquid stocks.