Average daily trading volume

Average daily trading volume is the typical number of shares of a stock that change hands per day, usually calculated over a trailing window such as 30 or 90 days. It is reported alongside the current day's volume on most brokerage and data platforms so investors can quickly tell whether today's activity is unusually heavy or light compared with normal.

The formula is:

The main use of average daily trading volume is judging liquidity, how easily an investor can buy or sell a position without moving the price against themselves. A stock with millions of shares changing hands daily can typically absorb a large order with minimal price impact, while a stock trading only a few thousand shares a day can see its price jump or crash on a single sizable trade. This matters most for larger investors and funds, who often cap their position size in a stock as a multiple of its average daily volume specifically so they are not stuck holding a position they cannot exit quickly.

A sudden spike well above a stock's average daily trading volume is also a signal in its own right, often accompanying news, an earnings report, or a sharp price move, and traders frequently check whether a breakout or breakdown in price is happening on volume meaningfully above average, which is read as a sign of real conviction behind the move rather than routine trading noise.