Positive Volume Index: What It Shows About Busy Trading Days

Some sessions on Dalal Street feel like a crowded railway platform. Volume jumps, everyone piles in, and the ticker moves fast. The positive volume index (PVI) is built to record exactly those days and ignore the rest. It only changes when today’s volume beats yesterday’s, so it ends up as a running record of what prices did while the crowd was most active. In this guide we’ll cover where it came from, how to calculate it by hand, how traders read it, and where it tends to trip people up.

If you’ve read our piece on the negative volume index, this is the other half of the same idea. The NVI follows the quiet days. The PVI follows the busy ones.

What the positive volume index measures

Investopedia describes the PVI as a technical indicator that tracks price changes on days when trading volume increases. If volume doesn’t rise from one period to the next, the PVI simply stays where it was. Traders use it to judge trend strength and to help confirm reversals, and it can be applied to a market index or to a single stock.

The thinking behind it goes like this. High-volume days are usually associated with the crowd, meaning the broad mass of traders reacting to news, tips and momentum. Low-volume days are said to carry more of the “smart money,” the professionals who move quietly. So the PVI tells you what the crowd has been doing to prices. The NVI tells you what happens when the crowd is away.

That framing is a working assumption, not a proven fact. Nobody tags each trade as “smart” or “crowd.” Keep that in mind and the indicator becomes far more useful, because you stop treating it as a window into anyone’s mind and start treating it as a filter on price data.

A short history: Dysart, then Fosback

According to Wikipedia’s page on the negative and positive volume indexes, Paul L. Dysart Jr. started building the two series in 1936. He split the market’s advances and declines by whether volume was higher or lower than the previous day. The series for higher-volume days became the Positive Volume Index, and the one for lower-volume days became the Negative Volume Index. Dysart worked off New York Stock Exchange volume and advance-decline data, not a price average.

Dysart called the PVI the “majority” curve. His view was that the majority tends to copy the minority, just with worse timing. Interestingly, he first thought the PVI would be the more useful of the two series. By 1967 he had changed his mind and wrote that the NVI had proved to be the most valuable of all his breadth indexes.

The version most traders use today comes from Norman G. Fosback, who wrote about it in his 1976 book Stock Market Logic. Fosback made three changes, per the same Wikipedia page:

• He cumulated the daily percentage change in a market index instead of the difference between advances and declines.
• He suggested starting the series at a base level, such as 100.
• He used the index’s position above or below its one-year moving average to generate signals.

Investopedia adds that Fosback’s work is what made the indicators popular, and that he extended them to individual securities. One thing Wikipedia points out is easy to miss: the indicators were created for, and tested on, major market indexes. Using them on a single stock is common, but it goes beyond what the original research looked at.

The PVI does not tell you who is buying. It only tells you what price did on the days when more shares changed hands than the day before.

The positive volume index formula

The calculation is short. Investopedia gives it as follows.

If today’s volume is greater than yesterday’s volume:

PVI = Previous PVI + [(Today’s close − Yesterday’s close) ÷ Yesterday’s close] × Previous PVI

If today’s volume is less than or equal to yesterday’s volume:

PVI = Previous PVI

In plain words, on an up-volume day you take the day’s percentage price change and apply it to the running PVI. On every other day you carry the old number forward. Note the “less than or equal” part. A day with exactly the same volume as the day before does not move the PVI.

You also need a starting value. Fosback’s suggestion was a base such as 100. The base doesn’t change the shape of the line at all, it only changes the scale, so pick whatever keeps the numbers easy to read.

Worked example: computing PVI by hand

Let’s run through a made-up stock over six sessions. All prices and volumes below are hypothetical and are only there to show the arithmetic. We’ll start the PVI at 1,000 so the decimals stay readable.

Walk through the busy days. On Day 1 the price rose from ₹500 to ₹510, which is 2%, so the PVI went from 1,000 to 1,020. On Day 3 the price went from ₹505 to ₹520. That’s a gain of about 2.97%, and 1,020 × 1.0297 gives roughly 1,050.30. On Day 5 the stock fell 4%, from ₹515 to ₹494.40, on the heaviest volume of the week. So 1,050.30 × 0.96 brings the PVI down to about 1,008.29.

Days 2, 4 and 6 didn’t move it. Day 4 is the one people get wrong: volume was 18 lakh on both Day 3 and Day 4, so it isn’t an up-volume day and the PVI holds.

Now step back. Over the six days the stock went nowhere. It started at ₹500 and ended at ₹500. The PVI, though, finished about 0.83% higher, at 1,008.29. That small net gain is the sum of what happened on the three busy days only. If we ran the NVI on the same data, using only Days 2 and 6, it would end near 1,001.41. Same stock, same week, two different stories depending on which days you count.

That’s the whole point of these indexes. They slice one price series by volume and let you compare the slices.

How traders read the PVI

A raw PVI line is jumpy, so most people smooth it. Investopedia notes that traders often plot a nine-period moving average of the PVI and compare it with a 255-period moving average, which is roughly one year of trading days. The general readings it describes are:

• PVI above its one-year average: the crowd is optimistic, which helps confirm a price rise.
• PVI below its one-year average: the crowd is turning pessimistic, and a decline may be coming or already underway.
• PVI crossing above the 255-period average from below: a possible new uptrend, which stays confirmed while the PVI holds above that average.

Fosback’s historical results are the numbers you’ll see quoted everywhere. Using a 1941–1975 test period, he found that when the PVI was above its one-year moving average, there was a 79% probability that a bull market was in progress, according to Wikipedia. Investopedia frames the same result the other way round: a 21% chance of a bear market in that situation. When the PVI was below its one-year average, the chance of a bear market was 67%.

Compare that with the NVI. In the same study, Wikipedia reports a 96% bull-market probability when the NVI was above its one-year average. So in Fosback’s data the quiet-day index was the sharper bull-market signal, while the busy-day index had a bit more to say about bear markets. Wikipedia also adds a fair warning: those figures come from a 1941–1975 sample, and modern tests may show different probabilities.

A 67% reading from a test that ended in 1975 is a starting hypothesis, not an edge you can bank on today.

Using the positive volume index alongside the NVI

Investopedia says the PVI is usually followed together with the NVI, and the two are grouped as price-accumulation volume indicators. It also points out that the PVI is more volatile when volume is rising, and the NVI is more volatile when volume is falling. That makes sense from the formula. Each index only moves on its own type of day.

A practical way we like to think about the pair:

• Both above their one-year averages: price has been firm on busy days and on quiet days. That’s broad strength.
• NVI rising, PVI flat or falling: price holds up on quiet days but slips when the crowd shows up. This is close to Dysart’s idea that a move is “good” if it holds once volume subsides.
• PVI rising, NVI falling: gains are coming mainly on high-volume days and fading on quiet ones. Be careful. Rallies that need constant excitement to hold up can tire quickly.

Treat these as ways of asking better questions, not as rules. The sources describe the general idea of reading the two together; the specific combinations above are our own interpretation of that idea.

PVI vs on-balance volume

People sometimes mix up the PVI and on-balance volume (OBV) because both use price and volume. Investopedia draws the line clearly. The PVI decides whether to count a day based on volume, then records the price change. OBV does the opposite: it decides the sign based on price, adding the day’s volume when the close is higher and subtracting it when the close is lower. Because the two are built so differently, they’ll often give different signals on the same chart. If you want another volume tool that blends both inputs, our guide to the Klinger oscillator is a good next read.

Where the PVI falls short

Investopedia is fairly blunt about the weaknesses, and they line up with what you’d expect from the formula:

• It tracks the crowd. If you accept the premise, the PVI is following the “not-smart money,” which is why it’s normally paired with the NVI.
• Whipsaws. The indicator can cross its average several times in quick succession, which makes the true trend hard to read from the PVI alone.
• Odd drifts. The PVI can keep sliding even while price is rising strongly. This happens when the gains come on quieter days and the busy days are the down days.
• Not 100% accurate. Even in Fosback’s own numbers, a PVI below its average did not mean a bear market about a third of the time.

We’d add one practical point that follows from the definition. Any day with a one-off volume spike counts as a PVI day, whether the spike came from real buying interest or from something mechanical like an index rebalance or a large block deal. On a single stock, one such day can shift the line in a way that has little to do with crowd mood. On a broad index, these effects tend to wash out more, which is another reason the original testing was done on market indexes.

Putting the PVI into a routine

If you want to try it, here’s a sensible way to start:

1. Pick a broad index first, since that’s what the indicator was designed and tested on.
2. Calculate the PVI from daily closes and volumes, starting at any base value.
3. Add a 255-period moving average, and optionally a 9-period average for a smoother signal line.
4. Plot the NVI next to it, built the same way but using only lower-volume days.
5. Use readings as confirmation for what price action already suggests, not as a standalone trigger.

Investopedia’s own recommendation is to use the PVI alongside price action, other technical indicators and, for longer-term decisions, fundamental analysis. That’s good advice for nearly any indicator. For a broader grounding in how these tools fit together, see our technical analysis guide for Indian stocks.

The takeaway

The positive volume index is a simple filter. It keeps the busy days, throws away the rest, and shows you the cumulative price change from those days alone. Its history is solid: Dysart in the 1930s, Fosback’s version in 1976, and a set of bull and bear market probabilities that still get quoted decades later. Its weaknesses are just as real: whipsaws, odd drifts and a premise about “crowd” versus “smart money” that nobody can directly test. Used next to the NVI and plain old price action, it’s a useful second opinion. Used alone, it’s one more line to over-read.

Disclaimer: This article is for education only and is not investment advice. Technical indicators do not guarantee future results, and historical test results may not repeat. The worked example uses hypothetical figures. Consult a SEBI-registered adviser before making investment decisions.