Average volume

RECENT NEWS
Forbes  May 26  Comment 
The iShares Global Materials ETF (MXI) is seeing unusually high volume in afternoon trading Thursday, with over 552,000 shares traded versus three month average volume of about 33,000.  Shares of MXI were up about 0.1% on the day.
Forbes  May 25  Comment 
The iShares Global REIT ETF (REET) is seeing unusually high volume in afternoon trading Wednesday, with over 314,000 shares traded versus three month average volume of about 35,000.  Shares of REET were up about 0.4% on the day.
Forbes  May 25  Comment 
The most recent short interest data has just been released for the 05/13/2016 settlement date, and we here at BDC Investor have sifted through this fresh data and screened out these five BDCs. A metric we find particularly useful when comparing...
Forbes  May 25  Comment 
The most recent short interest data has been released for the 05/13/2016 settlement date, which shows a 6,288,071 share decrease in total short interest for American Eagle Outfitters, Inc. (NYSE: AEO), to 35,313,271.0, a decrease of 15.12% since...
Forbes  May 25  Comment 
The most recent short interest data has been released for the 05/13/2016 settlement date, which shows a 2,025,399 share increase in total short interest for Lions Gate Entertainment Corp. (NYSE: LGF), to 15,066,509, an increase of 15.53% since...
Forbes  May 25  Comment 
The most recent short interest data has been released for the 05/13/2016 settlement date, which shows a 627,243 share increase in total short interest for Rockwell Collins, Inc. (NYSE: COL), to 5,910,514, an increase of 11.87% since 04/29/2016....
Forbes  May 24  Comment 
The iShares MSCI KLD 400 Social ETF (DSI) is seeing unusually high volume in afternoon trading Tuesday, with over 171,000 shares traded versus three month average volume of about 27,000. Shares of DSI were up about 1.4% on the day.
Forbes  May 20  Comment 
The PowerShares Dynamic Biotechnology & Genome Portfolio ETF (PBE) is seeing unusually high volume in afternoon trading Friday, with over 93,000 shares traded versus three month average volume of about 40,000. Shares of PBE were up about 2.2% on...
Forbes  May 18  Comment 
The iShares Core U.S. Growth ETF (IUSG) is seeing unusually high volume in afternoon trading Wednesday, with over 282,000 shares traded versus three month average volume of about 58,000. Shares of IUSG were up about 0.3% on the day.
Forbes  May 13  Comment 
The iShares MSCI USA Value Factor ETF (VLUE) is seeing unusually high volume in afternoon trading Friday, with over 402,000 shares traded versus three month average volume of about 35,000. Shares of VLUE were down about 0.4% on the day.




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The average volume is the average number of shares traded daily for a particular security

Also known as average daily volume or average daily trading volume, the average daily volume is a measure of the liquidity of a stock based on the number of shares that trade hands from sellers to buyers each day. If a buyer purchases 100 shares, then the volume for that period increases by 100 shares from that transaction.

Unusually high volume in comparison to the average daily volume can indicate big news about a company - if something has changed investors' perception of a company's value, the trading that results (either buying or selling) pushes up volume for that day - for example, if a company submitted earnings or guidance that was unexpectedly high or low.

Securities with high average daily volume can be easily traded and are very liquid. Companies with low average daily volume are less liquid and harder to trade because there are fewer buyers and sellers for the stock. Securities with low average daily volumes (for example, fewer than 50,000 trades a day) are susceptible to higher volatility because sellers have more control over the price of the security. Securities with higher average daily volumes are more competitive and therefore less volatile.

Examples

Consider an extreme case of low average daily volume where there is only one seller of a security. If you want to buy that security from the seller, you have to accept their price because there is no one else competing for the sale. Later, as an owner of this low average daily volume security, the company releases horrible earnings news. Now, wou want to sell the security, however, because there are very few buyers for security, you are stuck with it.

In another case, you have two securities you're considering purchasing. Everything about the two companies is equivalent -- share price, earnings, demographics, etc. -- except, one of the securities has a higher trading volume than the other. In this case, purchase the company shares with the higher trading volume. This will ensure you purchase the shares at a competitive price and will have a better chance of selling the shares in the future.

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