Average Daily Volume

Average daily volume answers a simple question: how much of this stock changes hands in a normal session. It is calculated as total shares traded over a lookback window divided by the number of trading days in it. Windows of 20, 30 and 90 days are all in common use, and the choice matters — a short window tracks current conditions closely but reacts violently to one unusual day, while a long window is stable but slow to register a genuine change in liquidity.

For short selling it is the denominator that turns a position into a time estimate. Days to cover divides the reported short position by average daily volume, producing the number of sessions of ordinary trading it would take to buy every short position back. A large position in a liquid stock is unremarkable; the same position in a thinly traded one is a congested exit.

Several ASX-specific effects distort it. Index rebalance days concentrate enormous volume into a single closing auction, block crossings and off-market special crossings can print a year's worth of turnover at once, and takeover activity lifts volume for weeks. Any of these inflate the average and make a crowded position look easier to unwind than it is. Volume also collapses in the weeks around Christmas and Easter, cutting the other way.

Volume is not the same as liquidity. A stock can trade a reasonable number of shares while showing a wide bid-ask spread and thin depth, meaning a meaningful order still moves the price. Volume measures how much traded, not what it cost to trade it, so ADV is best read alongside spread and market depth rather than on its own.

Because the ASX and Cboe Australia both operate lit order books for ASX-listed securities, and a share of turnover executes off-market, quoted volume figures vary by source depending on which venues are consolidated.

Share volume and dollar volume are also different measures. A stock trading many millions of shares at a few cents represents far less capital than one trading a fraction of that at twenty dollars, so dollar turnover is the better guide to how much money can move without disturbing the price. Days to cover, though, is a share-count calculation, so share volume is the correct input there.