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 Articles
  1. Technical Indicators

    What are the best technical indicators to complement the Positive Volume Index (PVI)?

    Discover several of the best technical indicators that traders and market analysts use in conjunction with the Positive Volume Index, or PVI.
  2. Technical Indicators

    What is the Positive Volume Index (PVI) formula and how is it calculated?

    Understand how traders and analysts use the Positive Volume Index indicator, the theory behind it and the formula used to calculate it.
  3. Technical Indicators

    Why is the Positive Volume Index (PVI) important for traders and analysts?

    Take a closer look at the positive volume index, which is a technical price volume indicator used to identify possible bear markets.
  4. Trading Strategies

    What is the Negative Volume Index (NVI) formula and how is it calculated?

    Read about the Negative Volume Index, or NVI, a momentum indicator experiencing serious modifications since its introduction in the 1930s.
  5. Trading Strategies

    Why is the Negative Volume Index (NVI) important for traders and analysts?

    Dive into the theory and history of the Negative Volume Index (NVI), a volume-based indicator used to identify and qualify stock market trends.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Active Trading Fundamentals

    How Market Psychology Drives Technical Indicators

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

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center