Working Money magazine.  The investors' magazine.
Traders.com Advantage

INDICATORS LIST


LIST OF TOPICS





Article Archive | Search | Subscribe/Renew | Login | Free Trial | Forgot ID?


PRINT THIS ARTICLE


The Power Of Price And Volume Trends

08/15/00 10:47:02 AM
by Han Kim

To get a better sense of where the security's price is headed, you should consider volume along with price changes. Price changes are viewed with more significance when the volume accompanying the change is high, and conversely with less significance when the volume is low.

Security:   OAKT
Position:   Buy

How do you account for variance in volume on a price chart? By using an indicator such as the price and volume trend (PVT). PVT takes the relative change in price of the security, multiplies the accompanying volume, then adds the value from the previous PVT. Here's how to calculate PVT:

C = Today's Close
YC = Yesterday's Close
V = Today's Volume
YPVT = Yesterday's PVT

PVT = (((C - YC) / YC) * V) + YPVT

The general trend of the PVT tells you whether money is flowing in or out of a security. Below is an example of PVT applied to Oak Technology Inc. [OAKT]. In March and April the PVT trendline was clearly on the rise while prices were falling. This divergence indicates that prices were falling on relatively small volumes. Notice that price started to rise again and continued to do so as the PVT continued to rise.


A falling price trend during a rising PVT leads to a rally that will last as long as the PVT continues to rise.
Graphic provided by: WindowOnWallstreet.
 
In this particular case, the PVT continued to rise indicating that money was still flowing into OAKT. As a result, the prices continued to go up.

In conclusion, by using PVT to confirm major trends you will be taking into consideration the magnitude of both the change in price and the corresponding volume.



Han Kim

Traders.com Advantage Staff Writer

Title: Webmaster
Company: Technical Analysis, Inc.
Address: 4757 California AVE SW
Seattle, WA 98116
Phone # for sales: 206-938-0570
Fax: 206-938-1307
Website: www.traders.com
E-mail address: hkim@traders.com

Traders' Resource Links
Charting the Stock Market: The Wyckoff Method -- Books
Working-Money.com -- Online Trading Services
Traders.com Advantage -- Online Trading Services
Technical Analysis of Stocks & Commodities -- Publications and Newsletters
Working Money, at Working-Money.com -- Publications and Newsletters
Traders.com Advantage -- Publications and Newsletters
Professional Traders Starter Kit -- Software

Click here for more information about our publications!


Comments or Questions? Article Usefulness
5 (most useful)
4
3
2
1 (least useful)

Comments

Date: / /Rank: 5Comment: 
PRINT THIS ARTICLE





S&C Subscription/Renewal




Request Information From Our Sponsors 

DEPARTMENTS: Advertising | Editorial | Circulation | Contact Us | BY PHONE: (206) 938-0570

PTSK — The Professional Traders' Starter Kit
Home — S&C Magazine | Working Money Magazine | Traders.com Advantage | Online Store | Traders’ Resource
Add a Product to Traders’ Resource | Message Boards | Subscribe/Renew | Free Trial Issue | Article Code | Search

Copyright © 1982–2019 Technical Analysis, Inc. All rights reserved. Read our disclaimer & privacy statement.