PVT (Price Volume Trend)
The Price Volume Trend (PVT) is a momentum indicator that combines price and volume data to measure buying and selling pressure. It helps traders identify the strength of price trends by considering both price changes and trading volume, making it useful for confirming breakouts and potential reversals.
Formula
PVT = Previous PVT + [((Current Close - Previous Close) / Previous Close) × Volume]
Where:
Initial PVT value typically starts at 0 or 1000
How PVT Works
The PVT accumulates volume based on the relative price change. When prices rise, the full volume is added to the indicator. When prices fall, the full volume is subtracted. The resulting trend line helps identify the underlying momentum of price movements and potential divergences that could signal trend reversals.
Trading Strategies Using PVT
Strategy Examples
- Trade PVT divergences with price for reversal signals
- Use PVT trendline breaks for entry/exit points
- Monitor PVT moving average crossovers
- Combine PVT with other momentum indicators
- Use PVT to confirm price breakouts
Support and Resistance
- PVT trendlines act as dynamic support/resistance
- Historical PVT levels mark key price zones
- PVT breakouts confirm price level breaks
- Use PVT convergence at S/R for confirmation
- Monitor PVT accumulation at support levels
Trend Identification
- Rising PVT confirms bullish trend strength
- Falling PVT validates bearish momentum
- PVT slope indicates trend intensity
- Compare PVT with price trends for confirmation
- Watch for PVT trend changes before price
Advantages and Limitations
Advantages
- Combines price and volume for better trend confirmation
- Helps identify potential divergences early
- Useful for confirming breakouts and reversals
- Can signal institutional buying/selling pressure
Limitations
- Can generate false signals in choppy markets
- May lag behind rapid price movements
- Requires confirmation from other indicators
- Less effective in low-volume conditions
Best Practices When Using PVT
- Use multiple timeframes to confirm PVT signals
- Combine with other technical indicators for validation
- Wait for clear PVT divergences before taking counter-trend positions
- Monitor PVT during key support/resistance tests
- Consider overall market conditions when interpreting PVT readings
- Look for PVT confirmation on breakouts
- Track PVT patterns at major market turning points
- Document which PVT levels work best for your trading style
- Adjust PVT thresholds based on market volatility
- Regularly review and optimize your PVT-based strategies