Boost Your Trading IQ: Understanding the Price and Volume Trend in Crypto

An indicator that focuses on both price and volume simultaneously offers numerous advantages in the realm of providing traders with better trading signals. For this fundamental reason, such trading indicators are popular among traders, especially crypto traders who operate in highly volatile markets. In this context, we aim to introduce you to a powerful indicator known as the Volume Price Trend indicator. Are you ready to learn about it?

1. Price and Volume Trend: What’s It

The Price and Volume Trend indicator assists crypto traders in understanding the dynamics of a digital asset by examining the relationship between its trading volume and price movements. Put simply, the PVT helps crypto traders assess the level of interest and demand for a particular cryptocurrency. 

1.1. How Does Price and Volume Trend Appear

The PVT indicator looks like a line on a chart. It is usually placed below the main price chart. This line goes up and down, and its movements tell you about the popularity of a crypto market. 

If the PVT line is going up, it means more people are interested in buying the crypto. If it is going down, it suggests that interest in the crypto is waning.  

2.  The History of Price and Volume Trend Explained

The history of the PVT indicator goes back to the 1950s when a smart person named Joseph Granville came up with it. He wanted to create a way for investors to see if a stock was popular or not. He figured that if a lot of shares were being traded and the price was going up, it probably meant a lot of people wanted to buy that stock. And if the price was going down while many shares were being traded, it meant people might be trying to get rid of it. 

3. How to Calculate Price and Volume Trend

The formula for calculating the Price Volume Trend indicator is:

PVT = Previous PVT + Volume * (Today’s Closing Price – Previous Closing Price) / Previous Closing Price

Let’s break down the entire calculation into two parts:

• Take the previous day’s PVT score.
• Add the trading volume for today multiplied by the difference between today’s closing price and the previous day’s closing price, divided by the previous day’s closing price.

In simpler words, the PVT formula keeps track of how much people like a crypto asset. If more units are traded and the price goes up compared to yesterday, the score goes up. If units are traded, and the price drops, the score goes down.  

4. Steps to Launch Price and Volume Trend on a TradingView Chart

To add the Price and Volume Trend indicator to your TradingView chart, follow these simple steps:

• Log in to your TradingView account.
• Choose the trading pair or asset you want to analyse by typing its name in the search bar and selecting it.
• Look for the ‘Indicators’ button at the top of your chart.
• In the search box, type ‘Price and Volume Trend’ or simply ‘PVT’
• Click on the indicator for the search results.
• You can adjust the indicator’s settings if you like, such as changing the colour or line style.
• Click ‘Ok’
• Start analysis

Also Read: Trade Smarter, Not Harder: A Guide to the Demand Index

5. Analysing a Chart Using Price and Volume Trend: The Basics

Identifying divergence: is the simplest way to get a trading signal using this indicator. Look at the PVT indicator on the chart. Check if it is moving differently from the crypto’s price. If the PVT is going up, but the price is going down, or the other way around, that’s a divergence. When you see a divergence, it is sign to be careful/ The price might start moving in a new direction. 

Endnote

The Price and Volume Trend (PVT) indicator, introduced by Joseph Granville in the 1950s, remains a valuable tool for crypto traders. This indicator, represented as a line on a chart, gauges the relationship between trading volume and price movements, providing insights into market interest. Calculated using a formula tracking changes in trading volume and closing prices, PVT is easily integrated into TradingView charts. Traders can leverage PVT to identify divergence for potential trend reversals, enhancing their ability to make informed decisions in the dynamic cryptocurrency market.