Direct Answer
The Positive Volume Index (PVI) changes only on bars where volume rose from the prior bar, and then by the percentage price change. It is built on the idea that the crowd acts on high-volume days. It is usually read against a long moving average of itself: PVI above its average has historically been read as a favorable backdrop for the crowd's direction.
Positive Volume Index: Formula, Meaning, Signals, Examples and How to Use It
How Is Positive Volume Index Calculated?
The Positive Volume Index (PVI) changes only on bars where volume rose from the prior bar, and then by the percentage price change. It is built on the idea that the crowd acts on high-volume days.
Formula: If Volume > prior Volume: PVI = prior PVI x (1 + (Close - prior Close) / prior Close); otherwise PVI = prior PVI
Inputs:
- Bar closes
- Bar volumes
- Starting index value (commonly 1000 or 100)
Worked example. On a bar with higher volume than the day before, a close of 51 from 50 moves a prior PVI of 1,000 to 1020.00. The inputs are illustrative numbers, not market data.
Reading it. It is usually read against a long moving average of itself: PVI above its average has historically been read as a favorable backdrop for the crowd's direction. It moves only on rising-volume bars, so flat stretches mean volume was falling.
Limits. Relies on the claim that high-volume days reflect uninformed trading, which is an assumption rather than a guarantee. The starting value is arbitrary, and its signals come from a few decades-old studies of daily stock indexes, not intraday data.
What is Positive Volume Index?
The Positive Volume Index (PVI) changes only on bars where volume rose from the prior bar, and then by the percentage price change. It is built on the idea that the crowd acts on high-volume days.
How to use Positive Volume Index
It is usually read against a long moving average of itself: PVI above its average has historically been read as a favorable backdrop for the crowd's direction. It moves only on rising-volume bars, so flat stretches mean volume was falling. A reading alone is never a buy or sell signal; it needs context from price structure, volume, volatility and the broader market regime.
Strengths
- Moving only on rising-volume bars isolates price changes that happen when participation is increasing.
- The percentage update compounds from the prior value, so the index behaves like a price index and keeps relative changes consistent.
- Reproducible when the formula and data convention are fixed.
Weaknesses and limitations
- On bars where volume does not rise the index stands still, so long declining-volume stretches leave it flat regardless of price.
- Comparison is with the prior bar only, so one unusual volume day makes the next bar's classification flip.
- Correlated indicators can create false confidence by repeating the same underlying information.
Editorial and risk note
This page is educational content, not individualized investment advice. It should not imply guaranteed prediction, accuracy or outperformance.
Frequently Asked Questions
Is Positive Volume Index a buy or sell signal?
No. It is usually read against a long moving average of itself: PVI above its average has historically been read as a favorable backdrop for the crowd's direction. Relies on the claim that high-volume days reflect uninformed trading, which is an assumption rather than a guarantee. A trade built on it still needs a trigger, an invalidation rule, a position size and realistic execution assumptions.
What is the best setting for Positive Volume Index?
Positive Volume Index takes these inputs: bar closes; bar volumes; starting index value (commonly 1000 or 100). There is no universal best setting for the tunable ones, so test them across instruments, regimes and out-of-sample periods and favor stable parameter regions over one historical winner.
Can Positive Volume Index be used by itself?
Relies on the claim that high-volume days reflect uninformed trading, which is an assumption rather than a guarantee. The starting value is arbitrary, and its signals come from a few decades-old studies of daily stock indexes, not intraday data. For that reason it is read next to measures of direction, participation, valuation, liquidity and risk, not alone.
Does Positive Volume Index work on every timeframe?
The calculation can be run on any bar size, but behavior is not portable: a reading on a five-minute chart describes a very different market window from the same reading on a daily chart. Validate the exact timeframe before relying on it.
Why does Positive Volume Index give false signals?
On bars where volume does not rise the index stands still, so long declining-volume stretches leave it flat regardless of price. Comparison is with the prior bar only, so one unusual volume day makes the next bar's classification flip. Lag, noise and regime changes add to this, because market participants react to new information after the reading is calculated.
How should Positive Volume Index be backtested?
Rebuild Positive Volume Index from bar closes using point-in-time data, write the rules before testing, include delisted securities where relevant, model realistic fills and costs, reserve a validation sample and compare with a simpler baseline.