Learn How Price Volume Trend Is Used to Measure Money Flow in Trading

This Price Volume Trend (PVT) guide explains how the technical analysis tool works, along with different ways to interpret what it shows.

We explain some of the basic insights PVT provides traders, the formulas to calculate up day and down day price volumes, along with a detailed interpretation guide on an example chart.

What Is The Price Volume Trend?

Price Volume Trend (PVT) combines percentage price change and volume in an attempt to confirm the strength of price trends or through divergences, warn of weak price moves.

Unlike other price-volume indicators, the Price Volume Trend takes into consideration the percentage increase or decrease in price.

It does more than just add or subtract volume, based on whether the current price is higher than the previous day’s price.

Formula: How Do You Calculate The Price Volume Trend?

How the formula is calculated is presented below:

Up Day Price Volume Trend Formula

PVT = (Volume x Price increase % between current close and previous close) + Previous day’s PVT

Explained: On an up day, the volume is multiplied by the percentage price increase between the current close and the previous time period’s close. This value is then added to the previous day’s Price Volume Trend value.

Down Day Price Volume Trend Formula

PVT = (Volume x Price decrease % between current close and previous close) + Previous day’s PVT

Explained: On a down day, the volume is multiplied by the percentage price decrease between the current close and the previous time period’s close. This value is then added to the previous day’s Price Volume Trend value.

How To Interpret The Price Volume Trend

The Price Volume Trend may be helpful in seeing divergences; examples of these divergences are shown below in the chart of AT&T (T):

The Price Volume Trend indicator might be interpreted as follows:

• Increasing price accompanied by an increasing Price Volume Trend value, confirms the price trend upward.
• Decreasing price accompanied by a decreasing Price Volume Trend value, confirms the price trend downward.
• Increasing price accompanied by a decreasing or neutral Price Volume Trend value is a divergence and may suggest that the price movement upward is weak and lacking conviction.
• Decreasing price accompanied by an increasing or neutral Price Volume Trend value is a divergence and may suggest that the price movement downward is weak and lacking conviction.

What Does High #1 to High #2 Show?

AT&T stock made lower highs, but the Price Volume Trend indicator made higher highs. This bullish divergence warned that bulls might be taking control of the stock and shorting AT&T might not be advisable.

Since the Price Volume Trend indicator multiplies positive volume when prices close higher than the previous day’s close, the Price Volume Trend indicator could be interpreted as meaning that more volume flowed into High #2 than flowed into High #1.

More volume interest by buyers at High #2 signaled that the price move higher had significant strength behind it and it may continue.

What Does Low #1 to Low #2 Show?

The stock price made higher lows, generally considered a bullish signal; the Price Volume Trend indicator confirmed this move higher when it made higher highs as well.

Price Volume Trend is a valuable technical analysis tool that combines both price and volume and attempts to confirm price action or warn of potential weakness or lack of conviction by buyers and sellers.

Other similar indicators that should be investigated further are the Chaikin Oscillator and the Money Flow Index.

Further Reading on Volume Indicators

These volume tools complement Price Volume Trend: Accumulation Distribution, Chaikin Oscillator, and On Balance Volume (OBV).