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The Positive Volume Index (or PVI) by Norman Fosback, is based on the idea that on days when volume increases, the unsophisticated "crowd" have joined in, and a trend may become more marked. On the other side of the trading coin, if a day has decreased volume, then the "smart money" is moving into position to take advantage of the crowd. If the PVI is above its 1 year MA there's a 79% chance that an uptrend is in progress. If the PVI is below its 1 year MA, theres a 33% chance a bear market is occurring. Any day trading system can take advantage of knowing where the short and intermediate trend is, and the PVI is one more confirmation of this To calculate the PVI, if today's volume is greater than yesterday's volume, take yesterday's PVI and add it to (close - yesterdays close / yesterdays close) x yesterdays PVI. If today's volume is less than or equal to yesterday's volume then the PVI is yesterday's PVI.. |
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