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Average Daily Trading Volume

Average Daily Trading Volume (ADTV) is a key metric used in the financial markets to measure the number of shares or contracts traded in a security on an average day over a specified period, usually 30 or 90 days. ADTV is an important indicator of a security's liquidity; higher trading volumes typically suggest that the security is more liquid, meaning it can be bought or sold easily without significantly affecting its price. Conversely, securities with lower ADTV may be more difficult to trade without causing price fluctuations.

Example

If a stock has an average daily trading volume of 500,000 shares over the past 30 days, it indicates that on most trading days, approximately 500,000 shares of the stock are bought and sold.

Key points

• Measures the average number of shares or contracts traded daily for a security.

• Higher ADTV indicates better liquidity, meaning easier buying and selling with less price impact.

• Used by traders and investors to assess market activity and plan trades.

Quick Answers to Curious Questions

Higher ADTV suggests that a security is more liquid, making it easier to trade large volumes without affecting the price, which is crucial for minimizing market impact.

A low ADTV might suggest that the security is less liquid, making it more difficult to buy or sell large quantities without causing significant price changes.

Institutional investors use ADTV to gauge how easily they can execute large trades without disrupting the market or incurring significant price slippage.