This is a really complex question: like everything else in monetary economics, it connects to everything else. So, here's a second try.
There are actually several ways in which trading volume may be considered "high": high in terms of a large number of active traders, high relative to other days in the same (currency) market, or high in magnitude (of trading blocks).
What is important is the first of these three. The foundation of all modern currencies is absract value, as opposed to being directly linked to some commodity, like gold. This means that the value of a unit of currency is directly linked to your ability to buy something else with it. The ease with which you do so is a property called liquidity. The fact that everybody else around you is also willing to accept the value of your money allows you to easily convert that money into whatever it is you want to trade for it.
Having a lot of trades going on in the market, and a lot of players in the market means that 1) You can make a trade at any time you want, since there's always going to be someone buying or selling at any given moment 2) the "spread" or diference between the buyer's price and seller's price is very low, and the cost (in risk and in expense) is also relatively low. |
