Price Volume Trend is a cumulative indicator that weights volume by the percentage change in price — providing a more nuanced view of money flow than OBV's binary up/down classification. By scaling each period's volume contribution to the size of the price move, PVT creates a more accurate reflection of institutional conviction behind each price change.
On Balance Volume treats every up day identically regardless of whether price rose 0.1% or 5%. PVT scales the volume contribution by the magnitude of the price change, making it more sensitive to significant institutional moves.
PVT = Previous PVT + (Volume × ((Close – Previous Close) / Previous Close)). This means: a day where price rises 3% on 2 million shares adds 60,000 units to PVT. A day where price rises 0.1% on 2 million shares adds only 2,000 units. OBV would add 2 million to the total in both cases — treating them identically despite fundamentally different institutional significance.
| Scenario | Price Change | Volume | OBV Change | PVT Change | Significance |
|---|---|---|---|---|---|
| Major up day | 5% | 5M | 5,000,000 | 250,000 | High — institutional conviction |
| Minor up day | 0.1% | 5M | 5,000,000 | 5,000 | Low — little conviction |
| Major down day | -4% | 3M | -3,000,000 | -120,000 | High — aggressive selling |
| Minor down day | -0.1% | 3M | -3,000,000 | -3,000 | Low — minimal selling |
OBV treats a 0.1% up day on 5 million shares the same as a 5% up day on 5 million shares. PVT recognises that the 5% day has 50 times more institutional significance. This scaling makes PVT more accurate at identifying days where real institutional capital was moving aggressively, versus days where price drifted slightly with high volume from market makers or passive index rebalancing.
When price is rising and PVT is rising, institutional volume is supporting the move. The percentage-weighted volume is net positive — each up day is generating proportionally more volume contribution than the down days. This is the healthy trend signature.
When price moves sideways but PVT continues rising, the volume-weighted price change is still net positive. Despite apparent price stability, institutions are buying the dips and the closes are systematically occurring on the positive side. This is one of the strongest accumulation signals — price is being absorbed, not distributed. A breakout from this consolidation is likely to be well-supported.
When price makes new highs but PVT makes lower highs or declines, the volume-weighted conviction behind each up day is decreasing. Price is being pushed higher but with less and less institutional backing — the classic distribution signature. This bearish PVT divergence often appears 2–4 weeks before price peaks.
Both indicators are valuable and ideally used together. They answer slightly different questions about the same underlying data.
When both PVT and OBV are rising during price consolidation, the accumulation evidence is very strong. When both are declining during a price rally, the distribution evidence is very strong. When they diverge from each other — OBV rising but PVT flat, or vice versa — it suggests the volume picture is mixed and requires more careful analysis.
Before entering a breakout trade, check PVT. If price is about to break above resistance and PVT is already making new highs (having risen more than price during the consolidation), institutional money has been steadily accumulating. This is the ideal breakout setup — pent-up buying pressure that will accelerate once price clears resistance.
For options traders: PVT declining while price rises suggests the underlying equity rally may be weak. This supports a bearish options bias — buying puts or selling calls against the weakening uptrend. The volume-weighted signal provides fundamental support for the directional options bias.