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The Price/Volume Trend Index ( PVT ) is a similar to On Balance Volume in that it is a cumulative momentum style indicator which which ties together Volume with price action. However the key difference is that the amount of Volume added to the total is dependent upon the relationship of Today's close to Yesterdays close
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The PVT can be considered to be more accurate than the OBV index in that the amount of volume apportioned each day is directly proportional to the underlying price action. So then, Large Moves account for large moves in the Index and small moves will account for small moves in the Index. This way the PVT can be seen to almost mirror the underlying market action, however as shown above, divergence can occur, and it is this divergence that is an indicator of possible future price action. |
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