Trade Volume Index – TVI Indicator

June 18

Trade Volume Index is a technical indicator, which detects the amount of money coming to and from the stock. TVI is generally created for making predictions based on intraday prices. Intraday data is vital for the active traders, who are concerned with the stock performance at key levels and need to make decisions instantly. In contrast, long-term investors are less concerned with intraday data and focus their attention on how the data of a stock at the end of the day.

Therefore, those investors will be more using the on-balance volume indicator, which is too similar to Trade Volume Indicator, but with the only difference that it is based on the closing volume of the stock trade. 

In addition to the above mentioned the trade volume indicator shows the distribution or accumulation of the security, thus it is important to know where the distribution/accumulation is moving. In this case the minimum tick value is applied, which is a specific amount used to compare the rate of change, and shows whether the security is accumulated or distributed. Hence, distribution/accumulation direction illustrates that the security trade is done at the bid price and the sellers distribute security while the TVI goes downwards. At the point when prices are flat the price moves upwards and accordingly the trade volume indicator grows and, the prices move downwards if prices are flat and the TVI is falling.

It is worth remembering how to calculate the trade volume index, after you know the direction of the stock. If it is accumulated, then trade volume index is equal to the amount of the prior trade volume index and the volume; if the security is distributed then the trade volume index will be equal to the amount of previous trade volume index minus the volume. For the day traders the trade volume index is a very useful tool.