Volume Price Trend Indicator (VPT)

What Is a volume Price Trend Indicator ( VPT ) ?

The volume price vogue ( VPT ) indicator helps determine a security ’ randomness price direction and strength of price change. The index consists of a accumulative bulk note that adds or subtracts a multiple of the percentage change in a share price ’ s vogue and stream volume, depending upon the security ’ s up or down movements .

example of the volume Price Trend Indicator

Image depicting an example of volume price trend indicator.

Understanding the volume Price Trend Indicator ( VPT )

The bulk price swerve indicator is used to determine the symmetry between a security ’ randomness demand and supply. The share change in the share monetary value vogue shows the proportional add or demand of a particular security system, while book indicates the power behind the drift. The VPT indicator is similar to the on-balance volume ( OBV ) indicator in that it measures accumulative book and provides traders with information about a security ’ second money run. Most charting software packages have the VPT indicator included .

trading With the book Price Trend Indicator

Signal Line Crossovers : A signal credit line, which is just a move average of the index, can be applied and used to generate deal signals. For exercise, a trader may buy a stock when the VPT line crosses above its bespeak line and sell when the VPT line passes below its signal production line .

Confirmations : The VPT index can be used in conjunction with moving averages and the average directional index ( ADX ) to confirm trending markets. For exemplify, a trader could buy a stock if the 20-day moving average is above the 50-day be active median and accompanied by rising VPT indicator values. conversely, the trader may decide to sell if the 20-day move average is below the 50-day moving average and the indicator ’ south values are falling .

The ADX besides measures drift and momentum and can be used with the VPT index to confirm that a market is trending. ADX readings above 25 indicate that a security is trending, while readings below 25 indicate sideways monetary value natural process. therefore, a trader could buy when the ADX is above 25 and the VPT note is above its signal line. They could sell when the ADX has a value below 25 and the VPT line is below its signal line .

deviation : Traders can use the VPT indicator to spot technical discrepancy. Divergence occurs when the indicator makes a higher high or a lower moo, but the security ’ mho monetary value makes a lower high or a higher low. Traders should place a stop-loss order above the most recent swing high or below the most recent swing depleted to minimize gamble .

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