Volume price trend

From Financial Literacy Wiki

Volume Price Trend (VPT) (also known as Price Volume Trend) is a technical indicator intended to relate price and volume in the stock market. VPT is based on a running cumulative volume that adds or subtracts a multiple of the percentage change in share price trend and current volume, depending upon their upward or downward movements.

The derivation of VPT is similar to On-Balance Volume but it takes into consideration the extent of security price changes.

Today's VPT = Yesterday's VPT + [( (Today's Close - Yesterday's Close) / Yesterday's Close) x Volume]

VPT is interpreted in similar ways to OBV. Generally, the idea is that volume is higher on days with a price move in the dominant direction, for example in a strong uptrend more volume on up days than down days. So, when prices are going up, VPT should be going up too, and when prices make a new rally high, VPT should too. If VPT fails to go past its previous rally high then this is a negative divergence, suggesting a weak move.

See Also

• On-Balance Volume (OBV)