Positive Volume Index

Description:

The Positive Volume Index (PVI) is a technical indicator designed to gauge bullish sentiment in the stock market by tracking days where trading volume increases compared to the previous day. Developed by Norman Fosback, the PVI calculates a cumulative index value based on days with increased volume, with each day's PVI determined by the price change relative to the previous day. Rising PVI values indicate sustained bullishness as volume increases on up days, potentially signaling the continuation of an uptrend. Traders often use the PVI alongside other technical indicators to confirm market trends and anticipate potential reversals, although it's essential to employ proper risk management strategies and consider other factors when making trading decisions.

Input Parameters:

Length: Number of periods used in the calculation.
MA Type: Select the moving average type such as EMA, SMA, or HullMA.
Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.

Use Case:

Confirmation of Bullish Trends: Traders use the Positive Volume Index (PVI) to confirm bullish trends by observing rising PVI values alongside increasing stock prices and volume. When the PVI consistently climbs higher, it suggests that buying pressure is strengthening, potentially signaling a continuation of the uptrend.
Identifying Bullish Reversals: A sudden spike in PVI after a prolonged downtrend may indicate a potential bullish reversal. Traders look for instances where the PVI sharply increases despite a history of declining prices, suggesting that buying interest is surging and sentiment may be shifting from bearish to bullish.
Divergence Analysis: Traders employ PVI in divergence analysis, where they compare the direction of the PVI with the direction of the stock price. Divergence occurs when the PVI moves in the opposite direction of the price trend, potentially signaling a weakening trend. Bullish divergence occurs when the PVI is rising while prices are falling, indicating possible bullish momentum building beneath the surface.

This feature can be used in: