Price Volume Trend (PVT)
Last updated
Last updated
The Price Volume Trend (PVT) is a cumulative indicator that combines price and volume to measure the strength of price trends. Similar in concept to the On Balance Volume (OBV), PVT adds or subtracts a portion of daily volume based on the percentage price change. It’s a valuable tool for traders who want to confirm price trends and identify potential turning points in the market.
Unlike OBV, which adds or subtracts the entire volume based on whether the price closes higher or lower, PVT uses the percentage change in closing price to scale how much volume is added or subtracted. This makes PVT more sensitive to price movements and arguably more nuanced.
The PVT is calculated cumulatively by adjusting the previous PVT value with the current period's volume, scaled by the percentage change in price.
PVT Formula:
Volume is the current period’s trading volume.
Close is the current closing price.
Previous Close is the prior period’s closing price.
This formula results in a running total that increases when price rises (with volume) and decreases when price falls (with volume). The more volume associated with a price move, the larger the change in PVT.
The PVT line is typically plotted as a single line beneath a price chart. The key insights come from:
Direction of the PVT line: If the PVT is rising, it suggests that buying pressure (volume on up days) is dominating. If it’s falling, selling pressure dominates.
Divergences: If price makes a new high but the PVT doesn’t, it could indicate weakening momentum and a potential reversal.
Confirming Trends: When both price and PVT are moving in the same direction, the trend is seen as strong and sustainable.
The Price Volume Trend does not require specific parameters like a period length, as it is a cumulative indicator. However, traders can combine it with moving averages of the PVT or of price to enhance analysis:
PVT with 10-day Moving Average: Helps smooth out short-term noise.
Overlay with 50-day MA on price chart: Useful for confirming trend alignment.
Ultimately, the best settings depend on your trading timeframe (e.g., daily, weekly) and strategy.
PVT is often used alongside price action and other indicators. Some common applications include:
When both price and PVT are making higher highs and higher lows, it confirms a bullish trend. The same goes for lower highs and lower lows in a downtrend.
If price is rising but PVT is flat or falling, it may signal that the trend lacks volume support — a red flag for continuation.
If price breaks above resistance and PVT also spikes upward, it validates the breakout. Lack of volume confirmation (flat or weak PVT) could mean a false breakout.
Pair PVT with indicators like RSI or MACD to add a momentum filter. For example, enter long only when PVT is rising and RSI crosses above 50.
Ignoring Divergences Many traders fail to notice subtle divergences between PVT and price that can warn of impending reversals.
Using It Alone PVT works best when used with other tools. Relying on it solely may result in false signals, especially in low-volume markets.
Overtrading on Minor Movements Small fluctuations in the PVT line do not always carry significant meaning. Focus on bigger structural changes and trend shifts.
Applying It to Illiquid Assets PVT becomes unreliable when volume data is thin or inconsistent.
The Price Volume Trend (PVT) is a powerful yet underrated indicator that gives traders insight into the relationship between price and volume. By accounting for both, PVT helps confirm trends, identify divergences, and validate breakouts — all critical components of successful technical analysis.
While PVT is valuable on its own, it becomes even more effective when combined with other indicators and sound risk management. For traders looking to build robust, volume-based strategies, the Price Volume Trend deserves a place in your toolkit.
