The Positive Volume Index (PVI) is a technical indicator used in financial markets to gauge the relationship between volume changes and price movements. Primarily, it focuses on days when the trading volume increases from the previous day. The PVI is used to identify trends where less informed investors are likely to participate, typically on days with rising volume.

Syntax:

PositiveVolumeIndex(price)

Calculation:

The PVI is calculated using the following logic:

• If today’s volume is greater than yesterday’s volume:
  PVI = yesterday's PVI + (today's close - yesterday's close) / (yesterday's close * yesterday's PVI)
• If today’s volume is less than or equal to yesterday’s volume, the PVI remains unchanged from the previous day:
  PVI = yesterday's PVI

Example:

To use the Positive Volume Index in a trading strategy, you might want to compare the current PVI to its previous value to determine market direction. Below is an example of how to implement this in ProBuilder:

i1 = PositiveVolumeIndex(close)
IF(i1 > i1[1] OR i1 = i1[1]) THEN
  result = lowest[5](low) - range
ELSE
  result = highest[5](high) + range
ENDIF
RETURN result

In this example, if the PVI is not decreasing, it suggests that less informed investors are active, potentially indicating a bullish scenario. The script then calculates a target price based on the lowest low or highest high over the past 5 periods adjusted by the ‘range’.

Interpretation:

The Positive Volume Index is useful for identifying when the market sentiment is likely driven by less informed investors entering the market on volume spikes. It is often used in conjunction with the Negative Volume Index (NVI), which focuses on days when volume decreases. A common strategy is to look for times when both the PVI and NVI are above their respective moving averages, suggesting a bullish market condition.