What Is a Volume Price Trend Indicator (VPT)?

The volume price trend (VPT) indicator helps determine a security’s price direction and strength of price change. The indicator consists of a cumulative volume line that adds or subtracts a multiple of the percentage change in a share price’s trend and current volume, depending upo𓃲n the security’s upward or downward movements.

Example of the Volume Price Trend Indicator

Understandin༒g the Volume Price Trend Indi𒁃cator (VPT)

The volume price trend indicator is used to determine the 澳洲幸运5官方开奖结果体彩网:balance between a secur꧟ity’s demand and supply. The percentage change in the share price trend shows the relative supply or demand of a particular security, while 澳洲幸运5官方ꦗ开奖结果体彩网:volume indicates the force 💖behind the trend. The VPT indicator is similar to the 澳洲幸运5官方开奖结果体彩网:on-balance volume (OBV) indicator in that it measures cumulative volume and provides traders with information about a security’s money flow. Most charting software packages have theಌ ꧂VPT indicator included.

Trading With the Volume Price Trend Indicator

As a technical momentum indicator, VPT allows traders and analysts to identify the supply and demand parity of ℱa stock. The following are some of the trading signals they look for.

Signal Line Crossovers

A 澳洲幸运5官方开奖结果体彩网:signal line, which is just a moving average of the indicat🍬or, can be applied and used to generate trading signals. For example, a trader may buy a stock when the VPT line crosses above its signal line and sell when th🌊e VPT line passes below its signal line.

Confirmations

The VPT indicator can be used in conjunction with moving averages and the 澳洲幸运5官方开奖结果体彩网:average directional index (ADX) to confirm trending markets. For instance, a trader could buy a stock if the 20-day moving average is above the 50-day moving average and accompanied by rising VPT indicator values. Conversely, the trader may decide to sell if the 20-day moving average is below the 50-day 澳洲幸运5官方开奖结果体彩网:moving average and the indicator’s values are falling.

The ADX also measures trends and momentum and can be used with the VPT indicator to confirm that a market is trending. ADX readings above 25 indicate that a security is trending, while readings below 25 indicate sideways price action. Therefore, a trader could buy when the ADX is above 25, and the VPT line 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.

Divergence

Traders can use the VPT indicator to spot technical divergence. 澳洲幸运5官方开奖结果体彩网:Divergence occurs when the indicator makes a higher high or a lower low, but the security’s price makes a lower high or a higher low. Traders should place a 澳洲幸运5官方开奖结果体彩网:stop-loss order above the most recent swing high or below the most ꦆrecent swing low🐠 to minimize risk.