Price Volume Trend (PVT)
The Price Volume Trend indicator (PVT) is a momentum based indicator used to measure money flow. PVT is similar to another technical analysis tool; On Balance Volume (OBV) in that it is an accumulation of volume. While the OBV adds or subtracts total daily volume depending on if it was an up day or a down day, PVT only adds or subtracts a portion of the daily volume. The amount of volume added or subtracted to/from the PVT total is dependent on the amount of the current day's price rising or falling compared to the previous day's close. Price Volume Trend (PVT) can primarily be used to confirm trends, as well as spot possible trading signals due to divergences.
PVT = [((CurrentClose - PreviousClose) / PreviousClose) x Volume] + PreviousPVT
Price Volume Trend (PVT) is used to measure momentum or buying and selling pressure. When price adjusted volume on up days outpaces price adjusted volume on down days, then PVT rises. When price adjusted volume on down days outpaces price adjusted volume on up days, then PVT falls. What this means is that when PVT is up, buying pressure is up and when PVT is down, then selling pressure is up. The basic theory behind the Price Volume Trend indicator is that volume precedes price. This is significant because it allows the PVT to be used for a couple of different purposes. It can be used for general trend identification or confirmation. It can also be used to anticipate price movement after divergences.
What to look for
Price Volume Trend (PVT), much like On Balance Volume (OBV), is useful for identifying or confirming overall market trends. This can be helpful for confirming signals or setups generated by additional signals which rely on being able to identify trend in order to be effective. Also, based on the theory that swings in positive or negative price adjusted volume flow (buying and selling pressure) precede changes in price, PVT can also identify potential trend reversals. Many technical analysts believe that PVT is a more accurate representation of market conditions because of the fact that the volume is price adjusted. Frequently, PVT mirrors market price movements very closely.
Divergence occurs when price movement is not confirmed by the indicator. In many cases, these divergences can indicate a potential reversal. Especially considering the premise behind the PVT indicator which is positive and negative price adjusted volume swings precede changes in price.
Bullish PVT Divergence occurs when price declines but PVT advances.
Bearish PVT Divergence occurs when price advances but PVT declines.
Price Volume Trend (PVT) is a good technical analysis tool for measuring buying and selling pressure. Many people believe that buying and selling pressure precedes changes in price, making this indicator valuable. Divergences especially, should always be be noted as a possible reversal in the current trend. Keep in mind that this indicator is very similar to the On Balance Volume (OBV) indicator. However, it is often viewed as being more closely tied to current price movements because it accumulates price adjusted volume rather than total volume. As with most indicators however, it is best to use PVT with additional technical analysis tools.
Can toggle the visibility of the PVT as well as the visibility of a price line showing the actual current value of the ADL. Can also select the ADL's color, line thickness and visual type (Line is the default).