Glossary / Market structure

Average dollar volume

Also called: ADV · dollar volume · liquidity

Average dollar volume is the value traded in a typical session — shares traded multiplied by price — averaged over a recent window. It is the standard practical measure of how much capital a security can absorb without the trade itself moving the price.

How it is measured

How is average dollar volume measured?

For each session in the window, multiply volume by a representative price, then average across the window. Twenty sessions is a common choice. Using value rather than share count is what makes the figure comparable: a million shares of a low-priced security and a million shares of a high-priced one are entirely different amounts of capital.

Why it matters

Why does average dollar volume matter to a swing trader?

Dollar volume is the constraint that decides which securities a given trader can realistically transact in, and it is the reason a scan result can be arithmetically correct and practically unusable. Thin securities also produce noisy inputs for everything else — period returns, relative-strength differences and momentum readings all become erratic when few trades set the price.

In Tapeline

Does Tapeline use average dollar volume?

Tapeline applies a liquidity floor to the ranked scanner and the public scorecard for this reason. The floor can be switched off on the scanner to browse the full scored universe.

Tapeline publishes the six factor names and the ordering of their weights. The numeric weights, the scoring equation and the band edges are not published.

Related

See this in the product

The live scanner · Full methodology

Related terms

Volume
Volume is the number of shares that changed hands over a period.
Relative volume
Relative volume compares the volume traded in a session to that same security's own average volume over a recent window, expressed as a multiple.
Bid-ask spread
The bid-ask spread is the difference between the highest price a buyer is currently willing to pay and the lowest price a seller is currently willing to accept.
Float
Float is the number of a company's shares that are actually available to trade in the open market.

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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.