Average volume

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SeekingAlpha  Sep 27  Comment 
By Edward Schneider, CFA: (Editors' Note: POET Technologies trades on the Toronto stock exchange under the ticker symbol PTK.V, with ~$CAD 1M daily average volume). Last week, I wrote an article entitled Ten More Overvalued Shorts. I have...
Forbes  Sep 25  Comment 
The most recent short interest data has been released by the NASDAQ for the 09/15/2014 settlement date, which shows a 1,496,394 share decrease in total short interest for Hospitality Properties Trust (NYSE: HPT), to 1,761,186, a decrease of 45.94%...
Forbes  Sep 25  Comment 
The most recent short interest data has been released by the NASDAQ for the 09/15/2014 settlement date, which shows a 4,206,928 share increase in total short interest for AvalonBay Communities, Inc. (NYSE: AVB), to 7,304,869, an increase of...
Forbes  Sep 25  Comment 
The most recent short interest data has been released by the NASDAQ for the 09/15/2014 settlement date, which shows a 3,196,890 share decrease in total short interest for Chevron Corporation (NYSE: CVX), to 17,140,223, a decrease of 15.72% since...
Forbes  Sep 25  Comment 
The most recent short interest data has been released by the NASDAQ for the 09/15/2014 settlement date, and we here at Dividend Channel like to sift through this fresh data and order the underlying components of the Dow Jones Industrial Average by...
Forbes  Sep 24  Comment 
The Guggenheim China Small Cap ETF (HAO) is seeing unusually high volume in afternoon trading Wednesday, with over 227,000 shares traded versus three month average volume of about 63,000.  Shares of HAO were up about 0.5% on the day.
Forbes  Sep 23  Comment 
The MSCI Argentina ETF (ARGT) is seeing unusually high volume in afternoon trading Tuesday, with over 509,000 shares traded versus three month average volume of about 42,000.  Shares of ARGT were off about 0.4% on the day.
Forbes  Sep 22  Comment 
The iShares Core MSCI Total International Stock ETF (IXUS) is seeing unusually high volume in afternoon trading Monday, with over 217,000 shares traded versus three month average volume of about 66,000.  Shares of IXUS were down about 0.8% on the...
Forbes  Sep 19  Comment 
The Morningstar Wide Moat ETF (MOAT) is seeing unusually high volume in afternoon trading Friday, with over 251,000 shares traded versus three month average volume of about 118,000.  Shares of MOAT were up about 0.1% on the day.
Forbes  Sep 18  Comment 
The PowerShares S&P 500 High Quality Portfolio ETF (SPHQ) is seeing unusually high volume in afternoon trading Thursday, with over 169,000 shares traded versus three month average volume of about 46,000.  Shares of SPHQ were up about 0.3% on the...




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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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