CVI

Notes:

These indicators and concepts are specifically designed for TradingView.com

Overview

The Cumulative Volume Index (CVI) is a technical analysis indicator that measures the level of institutional buying and selling activity in a given stock or market.

How to Trade

The Cumulative Volume Index (CVI) can be used to identify trends and confirm signals from other indicators. Here are some ways to use the CVI in trading:

1. Trend identification: A rising CVI indicates accumulation and a potential uptrend, while a falling CVI indicates distribution and a potential downtrend. Traders can use this information to identify the direction of the trend and position themselves accordingly.
2. Divergence: Divergence occurs when the price is moving in one direction while the CVI is moving in the opposite direction. This could be a sign that the trend is losing momentum and a reversal could be imminent.
3. Confirmation: The CVI can be used to confirm signals from other technical indicators. For example, if a stock is in an uptrend and the moving average crossover signals a buy, the trader can confirm the signal by checking whether the CVI is rising as well.
4. Overbought/oversold conditions: The CVI can also be used to identify overbought or oversold conditions. When the CVI reaches an extreme level, such as a new high or low, it may indicate that the market is overbought or oversold and due for a reversal.

How to Calculate

The formula for calculating the CVI is as follows:

CVI = CVI(previous period) + [(Up volume - Down volume) / Total volume]

The CVI for the first period is typically set to 1000, and the CVI for subsequent periods is calculated by adding the ratio of up volume to down volume to the previous period's CVI.

Here's an example of how to calculate the CVI for a five-period time frame:

Period 1: Up volume = 500, down volume = 250, total volume = 750, CVI = 1000Period 2: Up volume = 300, down volume = 200, total volume = 500, CVI = 1000 + [(300 - 200) / 500] = 1000.2Period 3: Up volume = 450, down volume = 400, total volume = 850, CVI = 1000.2 + [(450 - 400) / 850] = 1000.29Period 4: Up volume = 350, down volume = 600, total volume = 950, CVI = 1000.29 + [(350 - 600) / 950] = 1000.05Period 5: Up volume = 800, down volume = 400, total volume = 1200, CVI = 1000.05 + [(800 - 400) / 1200] = 1000.33

As you can see, the CVI is a cumulative indicator that takes into account both up and down volume over a period of time. The higher the CVI, the more buying pressure there is in the market, while a lower CVI indicates more selling pressure. Traders can use the CVI to identify trends and potential changes in the market's direction.