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Average Daily Trading Volume - ADTV

Average Daily Trading Volume - ADTV

What Is Average Daily Trading Volume (ADTV)?

Average daily trading volume (ADTV) is the average number of shares traded in no less than a day in a given stock. Daily volume is the number of shares that are traded every day, except this can be averaged over a number of days to track down the average daily volume. Average daily trading volume is an important metric since high or low trading volume draws in various types of traders and investors. Numerous traders and investors favor higher average daily trading volume compared to low trading volume, on the grounds that with high volume it is more straightforward to get into and out positions. Low volume assets have less purchasers and venders, and subsequently it very well might be more diligently to enter or exit at a desired price.

What Does Average Daily Trading Volume (ADTV) Tell You?

At the point when average daily trading volume (ADTV) increments or diminishes emphatically, it signals that there has been a substantial shift in how individuals value or view the asset. Normally, higher average daily trading volume means that the security is more competitive, has smaller spreads and is ordinarily less unstable. Stocks will generally be less unstable when they have higher average daily trading volumes since a lot larger trades would need to be made to influence the price. This doesn't mean a stock with high volume will not have large daily price moves. On any single day (or over several days) any stock could have an exceptionally large price move, on higher than average volume.

The average daily trading volume is a frequently refered to security trading measurement and a direct indication of a security's overall liquidity. The higher the trading volume is for a security, the more purchasers and merchants there are in the market which makes executing a trade is simpler and quicker. Without a reasonable level of market liquidity, transaction costs are probably going to become higher (due to larger spreads).

Average daily trading volume is a helpful instrument for examining the price action of any liquid asset. On the off chance that the price of an asset is rangebound and a breakout happens, expanding volume will in general affirm that breakout. A lack of volume demonstrates the breakout may fail.

Volume additionally affirms price moves either higher or lower. During strong price pushes up or down, volume ought to likewise rise. On the off chance that it isn't, there may not be sufficient interest to keep pushing the price. On the off chance that there isn't sufficient interest then the price may pullback.

During trends, pullbacks with low volume will generally lean toward the price eventually moving in the trending direction once more. For instance, in an uptrend, volume will frequently rise when the price is rising strongly. Assuming the stock pulls back and volume is low, it shows that there isn't a lot selling interest. Assuming the price begins to climb on higher volume once more, that can be a good entry point as price and volume are both affirming the uptrend.

At the point when volume is well better than expected, it some of the time demonstrates a climax of the price move. Such countless shares have changed hands in a certain price area that there might be no other person to step in and keep pushing the price that way. Steep price moves combined with steep volume increments can frequently be an indication of an inevitable price reversal.

Illustration of How to Use Average Daily Trading Volume (ADTV)

Along the lower part of the chart is a volume window. The red and green bars reflect daily volume, while the black line is the 20-day average volume. The average is less impacted by single day events, and is a better measure of whether overall volume is rising or falling.

The chart shows a resistance area on the left. The stock breaks above it on expanding volume, which affirms the price rise and breakout. After the breakout, the price solidifies and volume is very low, with the exception of one high volume day. Overall however, the average volume is declining during the whole solidification/pullback, appearing there is little selling pressure. The price breaks out higher again on strong volume, affirming another advance.

The price attempts to move higher, however volume and price don't follow through. As the price begins to decline volume increments. This demonstrates there is heaps of selling pressure and that the price could keep on falling.

The Difference Between Average Daily Trading Volume (ADTV) and Open Interest

Volume is some of the time mistook for open interest. Average daily trading volume is the average of the number of shares (stock market) or contracts (futures and options market) change hands in a day. Open interest is a futures and options term that depicts the number of contracts that are open, that haven't yet been closed. The two measurements are very unique. Volume is the raw amount of the number of contracts that change hands. Open interest measures the number of transactions that were utilized to open or close positions, and subsequently tracks the number of contracts which stay open.

Limitations of Using Average Daily Trading Volume (ADTV)

Average daily trading volume is a regularly utilized measurement and is helpful for determining if a stock meets a financial backer's or alternately trader's trade boundaries. However, adtv is an average. On some random day an asset can veer off from the average, creating a lot higher or lower volume.

The average can likewise shift after some time, rising, falling, or swaying. Subsequently, monitor volume and average volume consistently to ensure that the asset actually falls inside the volume boundaries you craving for your trading.

Huge changes in volume might signal that something has changed inside the asset, and these changes might be unfavorable or great. Volume won't let you know which it is, however will let realize that some further research or action might be required.


  • Daily trading volume is the number of shares that are traded each day. Average daily trading volume is commonly calculated more than 6 months.
  • Sizable volume increments imply something is changing in the stock that is drawing in more interest. This could be bearish or bullish relying upon what direction the price is going.
  • Ascertain average daily trading volume by adding up trading volume over the last X number of days. Then, at that point, partition the total by X. For instance, sum the last 20 days of trading volume and gap by 20 to get the 20-day ADTV.
  • Decreasing volume shows interest is fading, however even declining volume is valuable since when higher volume returns there is many times a strong price push too.