# What Is the Volume Price Trend (VPT) Trading Indicator?

![A computer screen showing stock volume and price changes](https://www.investopedia.com/thmb/W9V9MXwmZdIupMmtoe4GS6Bfugo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/VolumePriceTrendGettyImages-182178688-a781d9df352c4fa69b4b7d4fc9fc6664.jpg)

*— Pgiam / Getty Images*

## What Is a Volume Price Trend Indicator (VPT)?

The volume price trend (VPT) indicator helps determine a security’s price direction and strength of price change. The indicator consists of a cumulative volume line that adds or subtracts a multiple of the [percentage change](https://www.investopedia.com/terms/p/percentage-change.asp) in a share price’s trend and current volume, depending upon the security’s upward or downward movements.

## Example of the Volume Price Trend Indicator

![Image depicting an example of volume price trend indicator.](https://www.investopedia.com/thmb/xZaU3m4a1y4AZyi63IBa7OnMSwc=/1377x0/filters:no_upscale():max_bytes(150000):strip_icc()/vpt_indicator_example-5bfd6811c9e77c00517cdd3a)

**

## Understanding the Volume Price Trend Indicator (VPT)

The volume price trend indicator is used to determine the [balance between a security’s demand and supply](https://www.investopedia.com/ask/answers/030315/what-volume-price-trend-indicator-vpt-formula-and-how-it-calculated.asp). The percentage change in the share price [trend](https://www.investopedia.com/terms/t/trend.asp) shows the relative supply or demand of a particular security, while [volume indicates the force behind the trend](https://www.investopedia.com/articles/technical/02/091002.asp). The VPT indicator is similar to the [on-balance volume (OBV) indicator](https://www.investopedia.com/terms/o/onbalancevolume.asp) in that it measures cumulative volume and provides traders with information about a security’s money flow. Most charting software packages have the VPT indicator included.

## Trading With the Volume Price Trend Indicator

As a technical momentum indicator, VPT allows traders and analysts to identify the supply and demand parity of a stock. The following are some of the trading signals they look for.

### Signal Line Crossovers

A [signal line](https://www.investopedia.com/terms/s/signal_line.asp), which is just a moving average of the indicator, can be applied and used to generate trading signals. For example, a trader may buy a stock when the VPT line crosses above its signal line and sell when the VPT line passes below its signal line.

### Confirmations

The VPT indicator can be used in conjunction with moving averages and the [average directional index (ADX)](https://www.investopedia.com/terms/a/adx.asp) to confirm trending markets. For instance, a trader could buy a stock if the 20-day moving average is above the 50-day moving average and accompanied by rising VPT indicator values. Conversely, the trader may decide to sell if the 20-day moving average is below the 50-day [moving average](https://www.investopedia.com/terms/m/movingaverage.asp) and the indicator’s values are falling.

The ADX also measures trends and [momentum](https://www.investopedia.com/terms/m/momentum.asp) and can be used with the VPT indicator to confirm that a market is trending. ADX readings above 25 indicate that a security is trending, while readings below 25 indicate sideways price action. Therefore, a [trader](https://www.investopedia.com/terms/t/trader.asp) could buy when the ADX is above 25, and the VPT line is above its signal line. They could sell when the ADX has a value below 25, and the VPT line is below its signal line.

### Divergence

Traders can use the VPT indicator to spot technical divergence. [Divergence](https://www.investopedia.com/ask/answers/05/052905.asp) occurs when the indicator makes a higher high or a lower low, but the security’s price makes a lower high or a higher low. Traders should place a [stop-loss order](https://www.investopedia.com/terms/s/stop-lossorder.asp) above the most recent swing high or below the most recent swing low to minimize risk.

> **Article Sources**
>
> 1.  Trading View. "[Volume Price Trend with Divergence and Pivot Points](https://in.tradingview.com/script/LDrBnYIy-Volume-Price-Trend-with-Divergence-and-Pivot-Points/)."
>     
> 2.  IFC Markets. "[Average Directional Index - ADX Indicator](https://www.ifcmarkets.com/en/ntx-indicators/adx)."