Price Volume Rank Study

By Samantha Baltodano

TL;DR:

The Price-Volume rank study compares a security’s close price and volume today, to the previous day’s values. Based on the increase/decrease in price and volume, a ranking between 1-4 is assigned. Rankings 1-2 are considered confirmations of a buy signal. Rankings 3-4 are considered a confirmation of a sell signal.

What Is Price-Volume Rank?

The Price-Volume rank study is a technical indicator which compares close price and volume with their previous values. It compares the direction of the change in price (up or down) to the direction of the change in volume. It then assigns a number to that specific relationship. 

The rankings are as follows:

• If volume and close price are up, rank 1 is assigned. This is the most desirable market condition.
• When the price is up and the volume is down, the rank is 2. This is considered the second most desirable market condition.
• Rank 4 is assigned when the price falls and the volume rises. This is the weakest Price-Volume rank. It is the worst-case scenario and is seen when the selling pressure is greatest.
• If both are down, the rank is 3. It is often alerting us to a potential buying opportunity ahead. Even though prices are still moving down, volume begins to diminish as selling pressure abates.

By quantifying the price/volume interaction, Price-Volume rank seeks to determine our position within a typical market cycle.

Trade Signals

Ranks 1 and 2 can be used for confirmation of a buy signal. 

A sell signal might be confirmed by ranks 3 and 4.

Summary

•  It compares the direction of the change in price (up or down) to the direction of the change in volume. It then assigns a number to that specific relationship. 
• Rank 1 is the most desirable market conditions, while rank 4 is the worst case-scenario rank and is when the selling pressure is highest.
• Ranks 1 and 2 are confirmation of buy signals. Ranks 3 and 4 are confirmation of sell signals.

Price Volume Rank is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.

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