Positive Volume Index
Type
Trend follower
Short introduction
The Positive Volume Index (PVI) correlates the price change with the volume, but only if the current volume is greater than the volume of the previous day. It is not known who developed this indicator.
Statement
The indicator is based on the idea that rising trading volumes correspond to rising prices. If turnover increases, the difference between today's close and the previous day's close is calculated and divided by the previous day's close. This value is multiplied by the previous day's indicator value and then added to the previous day's value. If the volume falls or remains the same, the indicator value remains unchanged from the previous day.
A start value must be assigned to the indicator, otherwise the value will always be zero. As the absolute value of the indicator is irrelevant, the value can be chosen at will. A value of 1,000 is assumed in vwd portfolio manager.
Formula/calculation
ifVn >Vn-1
thenPVIn =PVIn-1 + ((C -Cn-1) ÷Cn-1 *PVIn-1)
ifVn ≤Vn-1
thenPVIn =PVIn-1
Start value: 1000
Interpretation
There are two different ways of interpreting the PVI:
On the one hand, you can draw your own trend lines. The interpretation rules are the same as those applied to normal price movements.
On the other hand, it is possible to calculate a GD on the indicator and use the intersection of the two lines as a signal generator. A buy signal is given when the indicator crosses its GD from bottom to top, a sell signal is given when the indicator crosses its GD from top to bottom.
Default setting
- daily, if necessary also once a week
Basic trading systems
- Positive Volume Index (PVI)
The basic trading system "Positive Volume Index (PVI)" shows the indicator and its linear GD 20. It provides buy signals when the indicator breaks through its GD 20 from bottom to top, and sell signals when it breaks through its GD 20 to the bottom.