The Price Volume Trend and Breakout Trading: Hidden Tactics to Predict Market Moves with Precision

Imagine this: You’re in a crowded store during a massive sale. Everyone’s grabbing items, the shelves are getting emptier by the second, and suddenly, there’s a restock of that one gadget you’ve been eyeing. The crowd shifts, and a few people rush toward the newly stocked item. That’s exactly what the market looks like during a breakout. Price and volume, those elusive pairs, are telling you a story—and if you listen closely, you’ll know when to jump in and grab that opportunity.

In this article, we’re diving deep into the Price Volume Trend and its role in Breakout Trading. Not your typical ‘basic indicator breakdown’ type of guide, but more of a ‘how to use this tool like a seasoned market ninja’ kind of breakdown. If you’re ready to see the hidden opportunities and understand why most traders get it wrong (so you can get it right), then keep reading.

The One Hidden Formula Experts Never Tell You

Let’s be honest—Price Volume Trend (PVT) is often overshadowed by more popular indicators. But here’s the thing: PVT combines two of the most crucial elements in the market—price movement and trading volume—to give you a clearer view of who is actually in control. If you know how to read the signals, you can get an edge that the majority of traders are missing.

The secret sauce here? Using PVT as a confirmation tool during breakouts. A breakout without substantial volume is like buying a used car—if there’s no proper record, chances are it might break down. When price breaks a key level, you want to see volume following along, confirming that there’s enough market force behind it. The larger the crowd (i.e., volume), the more reliable the move. It’s like organizing a party—if no one shows up, was it really a party?

Why Most Traders Get It Wrong (And How You Can Avoid It)

Many traders tend to jump into a breakout the moment price surpasses a resistance level. It’s exciting, I get it. But this is where we need to pause and ask ourselves: Is there enough ‘oomph’ behind this move? This is where PVT steps in like that friend who stops you from buying those on-sale-but-terrible shoes.

If the volume doesn’t increase as the price breaks out, it’s often a sign that the move is going to fade—like that sitcom plot twist that seemed exciting for five seconds, only to fall flat. Avoid being that trader. Look at the PVT indicator: if it’s moving in the same direction as the price during the breakout, then congratulations, the crowd is with you!

The Forgotten Strategy That Outsmarted the Pros

Now, here’s a tactic that very few are talking about: Combining PVT with Volume Weighted Average Price (VWAP). Most traders have a love-hate relationship with VWAP, but when you pair it with PVT, you get a dynamic duo that’s almost unstoppable.

Here’s the breakdown:

1. Watch for a Price Breakout Above VWAP: A price moving above VWAP indicates a bullish sentiment. But don’t get trigger-happy yet.
2. Check the PVT: Is the PVT trending upwards along with the breakout? If yes, then this is a breakout with conviction—meaning it’s backed by volume and likely to sustain the move. If no, maybe step back and reconsider.

This combination works wonders during the New York session, where the big players are in and volume spikes. Use this during the first two hours of a session to see some interesting results. Remember: Trading is a game of probabilities, and this method increases your odds.

How to Predict Market Moves with Precision

Picture this: You’re sitting on a beach, enjoying the sun (remember, we’re imagining here), and suddenly, you see the waves getting larger and larger. That’s a clear sign that a big wave is coming—and you need to brace yourself. In trading, volume is your ocean, and PVT helps you predict that big wave before it crashes onshore.

One lesser-known strategy is looking at divergence between PVT and price. When price is making higher highs, but PVT is falling, that’s like the tide receding before a tsunami—not the good kind. It indicates the buyers are running out of steam, and a reversal could be on the horizon. On the other hand, if PVT makes higher highs while price consolidates, it’s an indicator that the real action hasn’t even started yet—the market’s building energy for a breakout.

But Wait—The Real Magic Happens Here

There’s an aspect of PVT that can give you a major edge: using it to filter false breakouts. We’ve all been there. You see a breakout, you enter a trade, and suddenly the price reverses, and it’s like someone just pulled the rug from under your feet.

To avoid false breakouts, observe PVT during the pre-breakout phase. If the PVT has already started trending upward prior to the breakout, then the market’s already gearing up for a significant move. If PVT is flat or shows no real change, be careful—the market might just be faking you out.

Adding Humor to the Mix: Trading Isn’t Always Serious

I mean, honestly, trading without humor is like cooking without salt—it just doesn’t feel right. Ever bought into a breakout only to realize you’re in a fake-out, and it’s too late to reverse? It’s like buying a ticket to a concert that gets canceled last minute. Frustrating? Absolutely. Relatable? Unfortunately, yes. But here’s the takeaway—every mistake is an opportunity to learn.

Case Study: John vs. The Fake-Out Breakout

Let’s talk about John (not his real name, obviously). John bought into a breakout on GBP/USD based solely on price movement—he didn’t check PVT. The breakout looked solid, but as soon as he entered, the price reversed, and John was left sitting on a losing trade.

Had John used PVT, he would’ve noticed that volume wasn’t supporting the price move. Essentially, the price was moving on thin ice. Learn from John’s mistake—don’t be John.

The Forgotten Gem: Backtesting Breakout Strategies

If you’re not backtesting your breakout strategy, you’re essentially flying blind. Most traders believe that once they know the theory, they’re ready to take on the markets. But real money is made in the details—like testing your strategy over multiple pairs, different market conditions, and times of the day.

Use historical data to backtest PVT during breakouts. How often was the breakout sustained when PVT and price aligned? How often did the breakout fail when they diverged? By doing this, you’re not just guessing—you’re arming yourself with data-driven confidence.

How to Apply This Knowledge Today

• Master PVT as Your Go-To Confirmation Tool: Before entering any breakout trade, check PVT—if volume supports the price, go ahead. If not, be cautious.
• Pair PVT with VWAP: Use VWAP to determine fair market value and PVT to confirm the volume behind breakouts.
• Look for Divergences: They can signal a reversal—especially when PVT diverges from the price.
• Backtest Everything: Develop your data and confidence through consistent backtesting.

Insider Tactics You Can Start Using Now

1. Use PVT for Re-Entry Points: Often, traders enter too early on a breakout. By using PVT, you can identify points where volume and price re-align, indicating a good re-entry after the initial breakout.
2. Volume Spikes Are Key: During earnings or major economic news, PVT can be invaluable in determining whether the move is genuine or just noise.
3. Combine with RSI: When RSI is overbought and PVT shows no significant volume increase, you can avoid buying into the tail-end of a trend—saving you from a potential pullback.

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Image Credits: Cover image at the top is AI-generated