What is a price per volume (PBV) chart?
A price per volume (PBV) chart is a horizontal chart histogram plotted on the chart of a stock, showing the volume shares traded at a specific price level. Often price per volume histograms lie on the Y axis and are used by technical traders to predict support and resistance areas.
Key points to remember
- Price by volume charts are used to illustrate high buying and selling interest at specific price levels.
- They are indicative of price levels over a certain period of time.
- They are usually used in conjunction with other forms of technical analysis.
- They are also known as “volume-by-price charts”.
Understanding a Price by Volume Chart
Price-by-volume charts are used to illustrate high buying and selling interest at specific price levels, which may indicate Support and resistance in a given security. It is common to see the price of a security face little resistance when moving between levels that have small PBV bars, but the price may find it difficult to move above or below the areas. with large PBV bars. Some price-by-volume charts also delineate the difference between buy and sell volume by shading the sections in green or red. This information can be particularly useful in characterizing price levels as high resistance or high support levels rather than generic levels.
It is important to note that price-by-volume charts show total volume at certain price levels over a period of time. This means that the support and resistance levels projected in the future could be outdated. For example, if a stock had a bad quarter and a severe sale ensued, there may have been a very high level of volume in one day, but that may not be entirely relevant as a support level going forward. At the same time, support and resistance levels are more important for the future than for the past, because they have been added together over the entire period.
Often, price-by-volume charts are used in conjunction with other forms of technical analysis to maximize the chances of success, including both chart templates and technical indicators. For example, a trader can use trend lines to confirm the presence of support or resistance instead of relying exclusively on volume bars to show them pivots.
Example of a price by volume chart
The following chart shows an example of the SPDR S&P 500 ETF (NYSE ARCA: SPY):
In the chart above, you can see that most of the volumes over the time frame are between two price levels. These price levels served as key support and resistance areas towards the end of the period, with the bounceearly May. However, it should be noted that most of these levels were generated in early February, when the fund experienced the highest volume.
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