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The positive volume index was created by Norman Fosback. It is used, as with the Negative Volume Index, to determine the nature of trending markets.
The positive volume index is a cumulative indicator, its value increases by the daily return of the close price multiplied by the yesterday PVI value, if the volume is higher than the yesterday's volume and it remains the same in case today's volume is lower or equal to the yesterday's volume.
PVI shows the activity of nonprofessional traders in the market. The increase of volume in bearish days is generally explained by the increase of activity of amateur investors who are just following the crowd. In days where the volume is low, these amateurs are not particularly active, while the professional are working and making the true money.
The PVI is also used to generate buy or sell signals by comparing PVI value to its moving average over 255 days. According to Fosback, there is 67% probability of bear market when PVI is under its moving average and only 21% when it is above.
The function, named 'positive_volume_index' calculates PVI value in each bar starting from the assumption that PVI initial value is equal to 1.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.