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Daily dollar volume

Daily dollar volume is the appellation that The Motley Fool has given to the rough number of dollars that trade in a stock each day, obtained simply by multiplying the number of shares traded by the stock's price per share.

Expanded Definition

You can obtain this for any given day by multiplying that day's mean share price by the number of shares of trading volume.

You can obtain the average daily dollar volume by looking at the average daily trading volume over a given period, and the mean share price over that period.

The Motley Fool uses this to get a simple gauge on how liquid a stock is. The Fool's Foolish Eight screen for small caps has typically looked for an average daily dollar volume of between $1 million and $25 million. This is to ensure there is enough liquidity ($1 million at the absolute lowest, though even this may be too low these days) and, on the high end ($25 million), to ensure the stock isn't too well-known. The implication is that stocks that trade over $25 million a day have become a bit too popular for consideration within the Foolish Eight screen.

Daily dollar volume was originally introduced to Fool readers with the publication of The Motley Fool Investment Guide (1996).

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