Trade Volume Index (TVI)
TVI, or the Trade Volume Index, uses price and volume to demonstrate if a security is being sold or purchased; this is why it resembles the On Balance Volume indicator. The OBV method (On Balance Volume) functions effectively with daily prices but does not function as well with intraday tick prices. The TVI takes into consideration intraday tick data while the OBV takes into consideration the end of day data, which is the distinction between them.
The TVI is able to identify if a security is being distributed or accumulated. It shows that trades are taking place at the bid price as sellers distribute the security if the TVI is moving down. Trades are taking place at the asking price as buyers accumulate the security if the TVI is moving up. The prices start to move to the upwards if prices are flat and the TVI is rising. The prices decrease if prices are flat and the TVI is falling.
Tick prices, especially stock prices, often demonstrate trades at the ask or bid price for extended periods without changing which makes a resistance level or flat support in the chart. During these periods of unchanging prices, the TVI goes on accumulating this volume on the purchase or sell side, which all depends on the last price change.
The Trade Volume Index is measured by adding each trade's volume to a joint total when the price shifts up by a specified amount (which is known as the "Minimum Tick Value") and subtracting the trade's volume when the price shifts down by a specified amount.
Change = Price - Last Price
MTV = Minimum Tick Value
Accumulation when Change > MTV or Distribution when Change < MTV
With direction determined, calculate the TVI:
Accumulation: TVI = TVI + Today's Volume
Distribution: TVI = TVI - Today's Volume