The concept of the Positive volume index (PVI or Pos Vol) is when the price is rising and volume also increasing the indicator will rise. and in this time non-smart traders will enter to the stock in a crowd. but the smart trader will enter to the stock when the volume is decreasing.
Positive and negative volume index both are the opposite to each other. in the PVI indicator if the share price is and volume is increasing then the indicator will rise up, this means the non-smart trader entering to the stock because non-smart traders always in crowds.
but in the NVI indicator if the share price is rise and volume is rising, then the indicator line will fall. this means in the low volume smart can enter to the stock. and in the low volume smart money can move the share price movement.
Positive Volume index setting
- Field: The Default field is ‘close’. this means the period closing price will take to calculate this indicator.
- Moving average type: default moving average type is ‘simple’ this means, the calculation will be simple moving average (MA). other moving average types also available.
- Period: this is the MA line calculation period, the 255-period closing price will take to calculate MA.
- Index: this is the index line color.
- MA: this is the MA line color.
PVI Indicator calculation
- When the volume is increased than the previous Period volume if the share price is falling. Then the Indicator line will move downward direction.
- When the volume is increased than the previous period volume, if the share price is increasing, then the indicator line will rise up.
- When the volume is decreased than the previous period volume, then the indicator line will be flat, no matter the price is rising or falling.
What PVI Indicator tells you,
PVI or Pos Vol tells you what non-smart trader doing or non-smart trader doing.
Basically when the share price is rising and volume increasing then non-smart traders enter to stock. Then the Indicator line will rise up. This is the signal of non-smart trader enters to stock. And tells you what non-smart trader doing.
And if the share price is falling after non-smart trader entering to stock. Then you can assume that traders are selling. And if the share price is rising, the non-smart traders are buying the stock.
Positive volume index trading strategy
If the share price and Indicator are moving up, this is the bullish signal. You can go with buy.
If the share price & indicator is moving Downward, there is a possible share price can fall more. You can go with sell.
Use Pos Vol indicator with MACD Indicator.
in the Pos Vol indicator, if share price and Indicator is increasing, this is the bullish signal,
In the MACD Indicator, if the MACD line is crossing Singal line and moving upward direction, the Above zero line is the buying signal in MACD Indicator.
When Pos Vol and MACD both the Indicator are positive, then you can buy the stock.
If the share price and Indicator line are falling, this is the bearish Signal in the PVI indicator.
And In the MACD Indicator, if Signal Line crossing MACD line. And moving Downward direction. Below the ‘0’ line is the selling signal in the MACD Indicator.
When both Indicators is giving Negative Signal you can sell the stock.
Positive Volume index used to tells you, when price and Volume are increasing then Non-smart traders take entry in the stock in the crowds. And you will find what Nonsmart money Doing. Non-smart money can be moving the share to an upward direction or downward direction.
this is the opposite indicator of the Negative volume index. Negative volume Indicator used to find what smart money doing in the low volume. Because smart money doesn’t go in crowds. Smart money enters to market in a low volume.
*Read Related Post for more information.