PVOL (Price Volume)
The Price Volume (PVOL) indicator combines price and volume data to measure buying and selling pressure in the market. It helps traders identify potential trend reversals and confirm price movements by analyzing the relationship between price changes and trading volume.
Formula
PVOL = Price Change × Volume
Where:
Price Change = Current Close - Previous Close
Volume = Current Period's Trading Volume
How PVOL Works
PVOL multiplies the price change by volume to create a momentum indicator that shows the strength of price movements. Large positive PVOL values indicate strong buying pressure, while large negative values suggest strong selling pressure. The indicator helps traders identify whether price movements are supported by sufficient volume.
Trading Strategies Using PVOL
Strategy Examples
- Use PVOL divergence with price for reversal signals
- Monitor PVOL threshold levels for breakout confirmation
- Combine PVOL with moving averages for trend validation
- Track PVOL accumulation/distribution patterns
- Use PVOL spikes to identify potential market turning points
Support and Resistance
- High PVOL levels create strong support/resistance zones
- PVOL clusters indicate potential price barriers
- Historical PVOL extremes mark key price levels
- Use PVOL confirmation for S/R breakouts
- Monitor PVOL at previous support/resistance tests
Trend Identification
- Consistent positive PVOL indicates uptrend strength
- Sustained negative PVOL suggests downtrend momentum
- PVOL crossovers signal potential trend changes
- Volume-supported trends show higher PVOL values
- Declining PVOL warns of trend weakness
Advantages and Limitations
Advantages
- Combines price and volume for better market insight
- Helps identify strong trends and potential reversals
Limitations
- Can produce false signals in low volume conditions
- May lag behind rapid price movements
Best Practices When Using PVOL
- Use multiple timeframes to confirm PVOL signals
- Combine with other technical indicators for validation
- Wait for clear PVOL divergences before taking counter-trend positions
- Monitor PVOL during key support/resistance tests
- Consider overall market conditions when interpreting PVOL readings
- Look for PVOL confirmation on breakouts
- Track PVOL patterns at major market turning points
- Document which PVOL levels work best for your trading style
- Adjust PVOL thresholds based on market volatility
- Regularly review and optimize your PVOL-based strategies