Positive Volume Index - PVI

AAA

DEFINITION of 'Positive Volume Index - PVI'

An indicator used in technical analysis that is based on days where trading volume has significantly increased from the previous day. The Positive Volume Index (PVI) assumes that uninformed investors dominate the action on days with substantial trading volume, while the "smart money" - consisting of institutions, funds and professional traders - is more active on relatively quiet days with below-average trading volume.

As the PVI only takes into consideration days when trading volume is higher compared with the previous period, if the PVI is up, it implies that price is appreciating on rising volume, while a lower PVI implies that price is declining on rising volume. Technicians believe the PVI is better at identifying bear markets than bull markets. PVI can be calculated on a daily or weekly basis.

INVESTOPEDIA EXPLAINS 'Positive Volume Index - PVI'

The PVI and the Negative Volume Index (NVI) are together known as price accumulation volume indicators. They were first developed in the 1930s by Paul L. Dysart, who used market breadth indicators such as the advance-decline line to generate the PVI and NVI. The indicators gained popularity following their inclusion in a 1976 book titled "Stock Market Logic" by Norman Fosback, who expanded their application to individual securities.

Fosback's research, which encompassed the period from 1941 to 1975, suggested that when the PVI is trending above its one-year average, the probability of the market being in a bullish phase is 79%. When the PVI is trending below its one-year average, the probability of a bear market is 67%.

Calculation of the PVI depends on how current volume compares with the previous day's trading volume. If current volume is greater than the previous day's volume, PVI = Previous PVI + {[(Today's Closing Price-Yesterday's Closing Price)/Yesterday's Closing Price)] x Previous PVI}. If current volume is lower than the previous day's volume, PVI is unchanged.

RELATED TERMS
  1. Negative Volume Index - NVI

    A technical indicator that relies on changes in a security’s ...
  2. Index

    A statistical measure of change in an economy or a securities ...
  3. Volume

    The number of shares or contracts traded in a security or an ...
  4. Trade

    A basic economic concept that involves multiple parties participating ...
  5. Volume Of Trade

    The total quantity of futures contracts bought and sold during ...
  6. Up Volume

    A stock volume that closes at a price higher than the previous ...
RELATED FAQS
  1. What is a common strategy traders implement when using the Positive Volume Index ...

    Traders usually implement the positive volume index (PVI) in conjunction with the negative volume index (NVI) to help spot ... Read Full Answer >>
  2. What are the best technical indicators to complement the Positive Volume Index (PVI)?

    Some of the best technical indicators to complement use of the positive volume index (PVI) are the negative volume index ... Read Full Answer >>
  3. What is the Positive Volume Index (PVI) formula and how is it calculated?

    The Positive Volume Index, or PVI, is a technical indicator designed to provide a measure of significant trading volume increases ... Read Full Answer >>
  4. Why is the Positive Volume Index (PVI) important for traders and analysts?

    The positive volume index (PVI) is a technical indicator based on increases in day-to-day trading volume. Normally applied ... Read Full Answer >>
  5. What is the Negative Volume Index (NVI) formula and how is it calculated?

    There are two distinct versions of the Negative Volume Index, or NVI, along with one hybrid version that draws from both. ... Read Full Answer >>
  6. Why is the Negative Volume Index (NVI) important for traders and analysts?

    The Negative Volume Index (NVI), along with its cousin the Positive Volume Index (PVI), is one of the oldest technical indicators ... Read Full Answer >>
Related Articles
  1. Technical Indicators

    Simple Moving Averages And Volume Rate-of-Change

    We teach you how to confirm buy and sell signals by comparing two very simple indicators.
  2. Active Trading Fundamentals

    Identifying Market Trends

    The success or failure of your long- and short-term investing depends on recognizing the direction of the market.
  3. Active Trading Fundamentals

    Using Volume Rate Of Change To Confirm Trends

    Wise traders rely on indicators that show a trend in volume, because without supportive volume, a price movement has no conviction.
  4. Trading Strategies

    Introduction To Technical Analysis Price Patterns

    To "find your game" in technical analysis, you need to be able to recognize reversals and continuations as they form.
  5. Active Trading Fundamentals

    How Market Psychology Drives Technical Indicators

    The tenets of market psychology underlie each and every charting tool.
  6. Technical Indicators

    Trade This High Probability Bollinger Band Pattern

    Bollinger Band box patterns set up profitable opportunities when trends give way to well organized trading ranges.
  7. Trading Strategies

    Know How To Manage Gaps On Your Trading Strategy

    Gaps generate profitable strategies right after they print, as well as during retracements that test those levels, often months or years later.
  8. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  9. Chart Advisor

    Trade Healthcare Providers with this ETF

    In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Here's an ETF to consider.
  10. Fundamental Analysis

    Interested In Pharmaceutical Stocks? Try Novartis (ADR)

    Novartis AG, is the world's leading pharmaceutical company by sales. Here is a closer look at Novartis, and how its financials stack up.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center