The Price Volume Trend (PVT) is a volume-based indicator that combines price direction and volume flow to measure buying and selling pressure. It works similarly to the On-Balance Volume (OBV) but includes the percentage change in price, making it more sensitive to price moves. PVT helps traders confirm trend strength, spot divergence, and identify accumulation or distribution phases in the market.
Significance
- Tracks money flow by combining price change with volume.
- Confirms trend direction when price and PVT move together.
- Detects divergence between price and PVT to signal reversals.
- Indicates accumulation/distribution phases early.
- Useful in trend confirmation and breakout analysis.
Indicator Components & Values
- PVT Line → A cumulative line that adds or subtracts volume based on percentage price change.
- Volume Weighting → Larger price moves with high volume create stronger PVT shifts.
- Trend Signals →
- Rising PVT → Buying pressure.
- Falling PVT → Selling pressure.
- No fixed scale or levels → Interpretation is based on trend and divergence.
- Works on all timeframes, especially useful in short- to medium-term trading.
Trading Strategy
- Trend Confirmation → Go long when both price and PVT are rising; short when both are falling.
- Divergence Strategy → Buy when price makes a lower low and PVT makes a higher low (bullish divergence); sell on opposite setup.
- PVT + Moving Average → Confirm direction by combining PVT with a moving average (e.g., 50-MA).
- Breakout Signal → Confirm breakout strength when PVT surges along with price.
- PVT + RSI or MACD → Combine with momentum indicators to avoid false signals and strengthen confirmation.
