Price Volume Trend Indicator Formula, Strategy, Meaning

Price Volume Trend

Price Volume Trend indicator (PVT) is a technical momentum indicator which relates price and volume. It is utilized by investors and analysts to identify the parity between the supply and demand of a stock. This indicator was invented by Joseph E. Granville.

Traders use the Price Volume Trend and Volume Price Trend interchangeably to describe this technical analysis indicator. Actually, the purpose of Price Volume Trend indicator is to develop a relationship between price and volume. This PVT indicator relies on an operating accumulative volume that makes an addition or subtraction of a predetermined multiple of proportional change in a stock’s prevailing trend and current volume. Just like the working principle of Price Volume Trend Indicator, the On-Balance Volume (OBV) indicator also uses the cumulative sum of volume that is a percentage of changes in end of day prices. The difference between the two is that On-Balance Volume (OBV) sums all positive end of day values and subtracts all negative closing values whereas PVT only adds or subtracts a proportion of the day end volume. The amount of proportion is dependent upon the size of the difference between opening and closing volumes.

Traders can find the Price Volume Trend (PVT) indicator under the STUDIES section in the Zerodha Kite browser app. This indicator is also available in the Kite mobile App. The default Field is again close and we can set the field open, high, low or close. Please check the image below to understand how we attached the Price Volume Trend (PVT) indicator in HDFC Bank share price chart. You can attach the PVT indicator on to any charts likes daily, weekly, monthly or intraday.

Price Volume Trend Indicator

This PVT indicator is used by traders for calculating the difference between demand and supply of a particular security. The relative demand or supply for a particular security is denoted by the proportional change in a security’s price trend. Otherwise, Volume gives an indication of the force exerted by traders in a particular direction that may be upward or downward. If price changes considerably, then the PVT will add a significant part of the volume to PVT Value and vice versa. This PVT indicator is frequently used by traders to determine the strength of a trend in the market.

Calculation Of Price Volume Trend Indicator :

The formula is PVT to calculate :

[ [ (Close – Yesterday’s close)  / (Yesterday’s close) ] * Volume ] + Yesterday’s PVT

This formula is showing that Price Volume Trend is determined by multiplying each day’s volume by the Proportional change of price from its previous close and combining all values to get a cumulative sum.

In order to calculate PVT, the formula is :

PVT = [ ( Ct – Ct-1 ) * V] + …… + [ ( Ct-n+2 – Ct-n+1 ) * Vt-n+1 ]

Where,
Ct = Today’s Closing Price,
Vt = Today’s Volume,
n = Predetermined Period. It can vary from ‘1’ to ‘500’.

Price Volume Trend

Advantages of Price Volume Trend Indicator:

  • The main advantage of Price Volume Trend is more accurate and exact as compared to On-Balance Volume (OBV) Indicator in predicting future price movements which are PVT determines the proportional weight of each change.
  • In this On-Balance Volume (OBV) Indicator, regardless of the amount of change adds all incremental changes and subtracts all negative changes in the price of a security.
  • The PVT is indicating a money inflow and outflow for a particular currency during a specified period of time in stock chart. Although, the PVT also shows a Volume Line as a tool for displaying the proportional changes in a particular currency pair’s price trend.

Disadvantages of Price Volume TrendI ndicator:

  • The biggest demerit of PVT is that it doesn’t exhibit trade signals and this is main disadvantage of this indicator.

Price Volume Trend Indicator Formula, Strategy, Meaning

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