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What Is Up Volume?
Let me explain up volume to you directly: it's basically when the volume of shares traded in a market or for a specific security goes up, and that increase pushes the value higher. You can think of it as the opposite of down volume, where volume rises but prices fall.
Key Takeaways
Here's what you need to know about up volume. It happens when a security's price is climbing and trading volume is high or increasing at the same time. This can point to a trend shifting toward a rally or even a full bull market. Tools like positive volume indexes are useful for tracking this, as they help confirm if a price rise is signaling a bigger change in market sentiment.
Understanding Up Volume
You see up volume in bullish markets where prices are going up along with more trading activity. Sometimes it's called 'up on volume.' Volume overall gets affected by all sorts of things and can lead to different outcomes.
On a day with up volume, an index's value would rise while its trading volume increases too. The same applies to individual stocks—for instance, if a stock trades higher during the day and closes above the previous day's close, that's an up volume day.
Volume is just the total shares traded, and it spikes often after public news about a security comes out. Noise traders play a big role in these high-volume situations. Say a company's stock jumps on good news; if it was unexpected, both big institutions and everyday investors pile in, driving the price up. Noise traders jump on trends and trade based on feelings, which amps up the volume.
If you're a technical analyst or institutional investor eyeing a stock, you'll watch its volume closely. A sudden spike usually means there's a major event worth noting. Many in this field believe volume can signal a breakout, whether bullish or bearish.
PVI and NVI
The Positive and Negative Volume Indexes, or PVI and NVI, were created by Paul Dysart back in the 1930s to help figure out how trading volume impacts markets. They got more attention in the 1970s when people started applying them to single securities.
For PVI: If today's volume is higher than yesterday's, you calculate PVI as the previous PVI plus [(today's close minus yesterday's close) divided by yesterday's close] times the previous PVI. If volume is lower, PVI stays the same.
For NVI: If today's volume is lower than yesterday's, NVI is the previous NVI plus [(today's close minus yesterday's close) divided by yesterday's close] times the previous NVI. If volume is higher, NVI doesn't change.
These indexes show you how prices move with volume changes. In an up volume trend, PVI would climb as volume grows. So if you're looking to capitalize on bullish up volume, you could use PVI as a signal for potential price moves.
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