Trade Volume Index indicator is a technical indicator. It determines whether a security is bought or sold by calculating the quantity of cash inflow and cash outflow. Compare to many technical indicators, this indicator is determined on the basis of Intraday Price Values. It is based on the assumption that buying pressure rises when price approaches Ask price and selling pressure rises when price nears the Bid price. The outcome of this indicator is Accumulation which is shows on Purchase or Distribution which is shows on Sale trend for an underlying security. TVI is the abbreviation of Trade Volume Index. This indicator uses volume as well as price action in its formula. This TVI indicates the amount of a security purchased or sold. The Traders frequently uses TVI because it uses Intraday Price Data.
If traders wish to know more about the Trade Volume Index (TVI) indicator, then they can find it in the STUDIES section of Zerodha Kite. It’s also available in Kite mobile App. The Min Tick Value is 0.5. You can also Check the image below to understand how to attach the TVI indicator in HDFC Bank share price chart. We can use the Trade Volume Index indicator on to any time frame charts like daily, weekly, monthly or intraday (5 minutes, 15 minutes, 1 hour etc).
Calculation Of Trade Volume Index Indicator :
Change = Price – Last price
MTV = Minimum Tick Value
- When change is greater than MTV, then Direction = Accumulate.
- When change is less than -MTV, then Direction = Distribute.
- And when change is less than or equal to MTV and change is greater than or equal to -MTV, then Direction = Last Direction.
After determining the trend, the Trade Volume Index (TVI) by using this formula:
- When direction is accumulate then : TVI = TVI + Today’s Volume.
- When direction is distribute then : TVI = Previous TVI – Today’s Volume.
Advantages of the Indicator :
- Trade Volume Index is tailor-made for Day Traders. TVI indicator uses intraday price data to determine trend direction of a security.
- This indicator highlights every change in the Price of a security and can easily predict the trend of Investors i.e. Buying or Selling.
- This TVI indicator holds good even when the prices don’t deviate significantly from their previous close.
Disadvantages of Trade Volume Index Indicator:
- The formula of Trade Volume Index heavily relies on past data including previous TVI. Also, the prices of day end are most important, Trade Volume Index doesn’t consider the end of day data in its calculation.
- This indicator holds good only when its assumption then it is fulfilled but, markets tend to disagree with this assumption of Trade Volume Index indicator in maximum time.
Ankita has done her Diploma Engineering in Computer Science & Technology. She is pursuing her degree in Engineering and also well experienced in the equity market and real estate related content writing. She is the one who has developed the technical indicators section of our site.