Average Daily Share Volume

Average daily share volume is an important criterion to determine the potential of a particular stock.

Average daily share volume is the volume of a specific stock that is traded in a day over a period of time. Average daily share volume is calculated to determine the liquidity a particular stock in a market.

It is assumed that when a stock is having greater average daily share volume the stock has got maximum chance to gain in future as maximum number of investor is showing interest in the stock. With greater average daily share volume a stock is relatively easier to buy from the market and hence as an investor you have greater chance to gain from a stock with better average daily share volume.

On the other hand when a stock is having lower average daily share volume, it indicates that the stock is not a preferred one at the market and there is minimum number of buyers for the stock at the market. But one positive side of the stock with lower average daily share volume is that, in most cases the price of the stock tends to be lower than the usual. So, if you are absolutely confident about the future of the stock and ready to make a long term investment, even a stock with lower average daily share volume can be a viable stock option for you. But you need to consider other factors that will let your know bout the financial condition of the company before you take the decision to buy a stock with lower average daily share volume.

When the average daily share volume of a particular stock changes dramatically, it can be assumed that there is certain news about the company of that particular stock. You need to do your research really well before you invest in such a volatile stock. You need to study the financial standing of the company, price fluctuation of the stock for the last one year and even study the profit posted by the company in the past one year and so many other things that will help you understand the potential of the stock.

Though the average daily share volume is an instrumental part for determining the price of a particular stock you must not forget that it is not the only criteria for taking buying or selling decision of that particular stock.