Hey traders! Today, let's dive into the Price and Volume Trend (PVT) indicator, a handy tool on MetaTrader 5 that helps you analyze price movements in conjunction with trading volume. Similar to the On Balance Volume (OBV) indicator, PVT gives you a cumulative view of trade volumes while factoring in the changes in close prices.
The way PVT calculates its values is a bit different from OBV. In OBV, we add the entire daily volume to the indicator when the close price goes up, and subtract it when it goes down. However, PVT takes a more nuanced approach by adding or subtracting only a portion of that daily volume. This portion is determined by how much the current price has changed compared to the previous day's close.
While OBV sums up the cumulative total volumes for each period, PVT multiplies the volume by a coefficient based on the price change. This gives you a more responsive indicator that reacts to price movements rather than just volume shifts.
Price and Volume Trend indicator
How PVT is Calculated:
The PVT calculation is straightforward: it takes the current volume and multiplies it by the relative price change, then adds that to the current cumulative PVT value.
PVT (i) = ((CLOSE (i) - CLOSE (i - 1)) / CLOSE (i - 1)) * VOLUME (i) + PVT (i - 1)
Here’s what each term means:
- CLOSE (i) - the close price of the current bar;
- CLOSE (i - 1) - the close price of the previous bar;
- VOLUME (i) - the volume of the current bar;
- PVT (i) - the current value of the PVT indicator;
- PVT (i - 1) - the value of the PVT indicator from the previous bar.
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