How it works:
- When the price closes higher, the VPT is added to the previous VPT value based on the current volume.
- When the price closes lower, the VPT is subtracted from the previous VPT value based on the current volume.
- It gives more weight to price changes on higher volume, which can signal a more significant trend.
Formula:
VPT=VPTprev+((Close−PreviousClose)PreviousClose)×VolumeVPT=VPTprev+(PreviousClose(Close−PreviousClose))×Volume
Where:
- ( VPT_{prev} ) is the previous value of the Volume Price Trend.
- ( Close ) is the current close price.
- ( Previous Close ) is the previous close price.
- ( Volume ) is the trading volume for the current bar.
Usage:
- Rising VPT: Indicates a strong upward trend with increasing volume.
- Falling VPT: Indicates a strong downward trend with increasing volume.
A signal Line may help determining the trend.