Description

• Founded by Norman Fosback, PVI attempts to show actions of uninformed investor, as they are active on high volume days
• Norman believed that in smart money flow and taking position on the day of low volume, while crowd reacts more on noisy days when volume is heavy
• High indicator value is indicative of uninformed money flowing in the market. As experts enter when market is silent

Interpretation

• If price closes above its previous close and volume is greater than previous bar, it’s a buy signal
• If price closes below its previous close and volumes are is greater than previous bar, it’s a sell signal
• Along with PVI, its average can be plotted for crossover signals

Default Parameters Used/Inputs

• Price
• Close rate, Previous close rate
• Volume
• Number of shares traded on the bar

Returns/Output

Positive Volume Index values of stock for the specified period

Formula

For PVI, if volume0 > volume-1 than
PVI = PVI-1 + [((Close rate – Close rate-1)/Close rate-1 ) * PVI-1 ]
Else, PVI = PVI-1