Volume Price Trend (VPT)

Overview

The Volume Price Trend (VPT) indicator represents a cumulative volume-based calculation that adds or subtracts a multiple of the percentage change in share price trend and current volume, depending upon the investment's upward or downward movements. Unlike simple volume indicators, VPT considers the magnitude of price changes, making it more sensitive to the actual strength of buying or selling pressure. This creates a running total that oscillates above and below zero, providing insights into money flow dynamics.

The calculation formula VPT = Previous VPT + Volume × (Close - Previous Close) / Previous Close creates a cumulative line that rises when the majority of volume is associated with upward price movement and falls when volume accompanies declining prices. This percentage-based approach distinguishes VPT from other price-volume indicators like On-Balance Volume (OBV), which simply adds or subtracts the entire volume based on price direction, making VPT more nuanced in its analysis of volume flow.

Interpretation & Trading Signals

Trend Confirmation:

  • Rising Price + Rising VPT: Uptrend confirmed with strong volume support
  • Falling Price + Falling VPT: Downtrend confirmed with selling pressure
  • Price Up + VPT Flat/Down: Weak rally, potential reversal ahead
  • Price Down + VPT Flat/Up: Accumulation phase, possible bottom

Divergence Trading:

  • Bullish Divergence: Price makes lower lows while VPT makes higher lows
  • Bearish Divergence: Price makes higher highs while VPT makes lower highs
  • Hidden Divergence: Trend continuation signals in strong trends
  • Multiple Divergences: Stronger reversal signals when repeated

Signal Line Strategy:

  • Buy Signal: VPT crosses above its moving average signal line
  • Sell Signal: VPT crosses below its moving average signal line
  • Confirmation: Combine with ADX > 25 for trending markets
  • Best Timeframes: Works better on daily and weekly charts

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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