3 month average daily volume

This is the simple average of daily trading volume of a security going back over the previous 3 months. If the average volume of security is high it shows that lot of people are willing to trade in the security and trades in the security can be easily executed.

In the above example in case of company A, on an average 8 lakh shares of the company are being bought and sold on daily basis over the previous 3 months. So if a person is looking to buy 1000 shares the order will be easily executed. However in case of company B, the 3 months average trading volume is just 4,500 shares and an order to trade 1000 shares is approximately 22% of all orders on any given day. If the trader is looking to buy, share prices of company B will start trending up because of the huge volume in flow. Similarly share prices will tank if B is looking to sell large number of shares at single go in an illiquid stock.