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Saturday, August 6, 2011

[Stock Investing] - Average daily stock volume

You might have seen something like volumes traded at end of day analysis of many stocks on busines channels, economic times, financial news papers and may be at many other websites too. So in this post I would give a brief about what does "Average Daily share Volume" means actually and how it is important indicator for knowing where that stock is heading.

If I go by bookish definition of "Average daily stock volume" it comes out like this - 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.

If a stock has low average daily share volume means the stock is still not part of rat race and institutions doesnot want that stock price to gain some momentum. Such stocks are actually best for investments initially as it would help in learning the share investing techniques. On other hand if 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. My advice is always to use your own head before jumping into ocean of stock market investing really well.

1 comment:

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