The Percentage Volume Oscillator (PVO) is a momentum volume oscillator. The PVO measures the difference between two volume-based moving averages as a percentage of the greater moving average. As with Moving Average Convergence-Divergence (MACD) and the Percentage Price Oscillator (PPO), it is shown with a signal line, a histogram and a centerline. PVO is positive when the shorter volume EMA (Expotential Moving Average) is above the longer volume EMA and negative when the shorter volume EMA is below. This indicator can be used to define the ups and downs in volume, which can then be used to confirm or refute other signals. Typically, a breakout or resistance break is validated when PVO is rising or positive.
Take Me To Resources
The default settings for the PVO are the same as MACD or the PPO, wich is (12,26,9). Meaning the PVO is positive when the 12-day Volume EMA moves above the 26-day Volume EMA. Ergo, the PVO is negative when the 12-day Volume EMA moves below the 26-day Volume EMA. The extent of how positive or negative depends on how far above or below.
A PVO that equals 10 would indicate that the 12-day Volume EMA is 10% above the 26-day Volume EMA. A PVO that equals -5% would indicate that the 12-day Volume EMA is 5% less than the 26-day Volume EMA.
The PVO is Calculated using the following formula:
((12-day EMA of Volume - 26-day EMA of Volume)/26-day EMA of Volume) x 100
Signal Line: 9-day EMA of PVO
PVO Histogram: PVO - Signal Line
The PVO-Histogram behaves just like the MACD and PPO histograms. When the PVO-Histogram is positive the PVO trades above its signal line (9-day EMA). The PVO-Histogram is negative when the PVO goes below its signal line.
Note: The PVO is multiplied by 100 to move the decimal point two places.
As with all other indicators, don't just rely on the defaults, adjust your indicators to suit the stock you are looking at and your trading style.
Typically shorter look backs (lower #'s on your indicators) give you quicker signals which is good for aggressive traders, while longer look backs (higher #'s on your indicators) give slower but more reliable signals for traders who are more conservative.
As we always say: "Don't use your hard earned cash to find out what kind of trader you are, use a virtual account for that."
Links for free virtual trading sites can be found on our Resources page: