Price Volume Trend (PVT)

Name Type Prerequisite Use Cases
Price Volume Trend (PVT) Volume Price & Volume Provides a more granular view of volume flow than OBV.

Definition

The Price Volume Trend (PVT) indicator, similar to On-Balance Volume (OBV), is a momentum cumulative volume indicator used to measure money flow. However, unlike OBV which adds all volume if price is up, PVT adds only a portion of the volume proportional to the percentage price change.

Mathematical Equation

\[ PVT_t = PVT_{t-1} + \left( Volume_t \times \frac{Close_t - Close_{t-1}}{Close_{t-1}} \right) \]

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: Unbounded
  • Behavior: Similar to OBV, but it multiples the volume by the percentage change in price.

Visualization

Price Volume Trend

Trading Significance

  1. More Accurate than OBV: Because it weights volume by the magnitude of the price move, PVT often provides a more accurate reflection of market flow than OBV.

  2. Divergence: Divergence between price and PVT can signal a market reversal.

  3. Trend Confirmation: Rising PVT confirms an uptrend; falling PVT confirms a downtrend.