What is ADV?
Average Daily Volume is the average number of shares traded per day over a specific period (typically 30-90 days). It measures the stock's liquidity and trading activity.
Think of it like this
Think of a highway. High volume = busy freeway with lots of cars (easy to merge/exit). Low volume = quiet country road (you're very visible, hard to get in/out without affecting traffic).
Formula
ADV = Total Volume Over Period / Number of Trading Days- Total Volume: Sum of shares traded over period
- Trading Days: Number of trading days (typically 30-90)
Why it matters
- Indicates liquidity - can you get in/out easily?
- High volume means tighter spreads, easier execution
- Low volume increases slippage and risk
- Critical for large trades or institutional investors
What's a good value?
< 100K
Very Low
Illiquid, wide bid-ask spreads
100K-1M
Low
Limited liquidity, be careful with size
1M-10M
Moderate
Good liquidity for most investors
> 10M
High
Excellent liquidity, institutional-grade
Real-world example
Apple: 50M+ shares/day = mega liquid. Tesla: 80M+ shares/day = very active. Small biotech: 100K shares/day = be careful with orders. Penny stocks: <50K = danger zone for slippage.
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