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Average Daily Volume is the cumulative number of shares traded over a given time period, divided by the number of trading sessions in that period. Time frames for calculating average daily volume can vary though monthly and annual average daily volume are fairly common. Market technicians compare current daily volume to average daily volume to see if a recent price move occurred with above average daily volume. If so, the price move tends to be viewed a significant. Stocks tend to trade with volume which is significantly greater than average daily volume in sessions preceding known future events, such as earnings announcements and dividend declarations. In the absence of known future corporate actions, strong average daily volume is sometimes interpreted as a sign that an unforeseen event could be on the horizon.
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