What is the close location value (CLV)?
Close Location Value (CLV) is a metric used in technical analysis to assess where a security’s closing price falls relative to its day’s high and low prices.
CLV values range from +1.0 to -1.0, where a higher positive value indicates that the closing price is closer to the high of the day and a negative value greater than the closing price is closer to the close of the day.
- The closing location value (CLV) indicates the closing price of an asset in relation to its intraday high and low.
- A positive value means that the close is close to the high and negative to the low. CLV values of +1 would mean that the closing price is the same as the high of the day and -1 the low of the day.
- The CLV is used in conjunction with other indicators and the combinations form the basis for markers such as accumulation and distribution.
The formula for CLV is
CLV=High–Under(To close–Under)–(High–To close)
Understanding the value of close location
The Near Location Value is a technical analysis tool used to measure the location of the price in relation to the high-low range. It moves in the range of -1 to +1 or, if multiplied by 100, in the range of -100 percent to +100 percent.
CLV readings close to 1 (or 100 percent) indicate that the closing price is near its high and would be considered a bullish signal. CLV readings near -1 (or -100 percent) reveal that the closing price is near its low and could be seen as a bearish sign. CLV readings near zero are considered neutral.
The near location value is used in the calculation of the accumulation / distribution line, a technical indicator used to determine money flows to or from a particular security. The combination of CLV with additional technical indicators such as accumulation / distribution has become increasingly popular, as it is considered a stronger measure than relying only on the closing price of the security.
Using the near location value
On its own, most merchants do not consider the value of the nearby location to be very important. This indicator is used mainly as a variable in other technical equations.
For example, the CLV is prominent in the calculation of the Accumulation / Distribution Line:
Accumulation / Distribution=CLV×Period volume
One of the reasons CLV is not considered useful on its own is that it is extremely sensitive to random spikes or drops in price. This high volatility renders it almost useless in many circumstances, which is why stochastics is often preferred as a reliable high-low ratio metric. Stochastics are less choppy and rely on a different formula to determine where the price is in the high-low range.
When not part of another equation, the near location value can be used to confirm or reject possible divergences. All traders using this strategy are advised to use an intermediate or long period of time for their CLV, allowing sufficient historical perspective not to overreact to every fluctuation.