An indicator that measures whether volume truly backs the price trend. It quantifies the conviction behind the moves as the gap between a volume-weighted average and a simple average.
The Volume Price Confirmation Indicator (VPCI) was developed by Buff Dormeier as a volume-based confirmation tool.
It asks a single question: is the price trend in front of you backed by real volume, or is it a hollow move made without it?
VPCI answers this from the gap between two kinds of moving average.
The first is the volume-weighted moving average (VWMA), which gives the closes of heavy-volume days more weight and light-volume days less. The second is the simple moving average (SMA), which treats every day's close equally.
How far apart these two run tells you which way volume is pulling price.
When VWMA sits above SMA, the advance is happening on the heavy-volume days: the crowd is buying with conviction. When VWMA sits below SMA, the advance is unfolding on thin volume, and the move becomes suspect.
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NASDAQ:AAPL
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