Negative Volume Index - NVI

AAA

DEFINITION of 'Negative Volume Index - NVI'

A technical indicator that relies on changes in a security’s volume to identify when smart money is driving the current trend. The Negative Volume Index suggests that unsophisticated investors buy and sell primarily on high-volume days, while shrewd investors are more likely to trade on low-volume days. The concept was developed by Paul Dysart in the 1930s and later refined by Norman Fosback.

INVESTOPEDIA EXPLAINS 'Negative Volume Index - NVI'

Often when volume drops, price drops. If a stock’s price increases despite a decrease in volume, technical analysts consider this a positive sign. They use the negative volume index to help identify bull and bear markets.

To determine the Negative Volume Index:

1. Use 1000 as the starting point for Cumulative NVI

2. Add the Percentage Price Change to Cumulative NVI when volume decreases (NVI remains unchanged when volume increases)

3. Create a 255-day exponential moving average

Followers of the NVI believe a bull market is likely when NVI is above its 255-day moving average and that a bear market is in store when the index drops below the moving average. Theorist Norman Fosback has acknowledged, however, that the NVI has historically been far more effective at predicting bull markets than downward trends.

RELATED TERMS
  1. Positive Volume Index - PVI

    An indicator used in technical analysis that is based on days ...
  2. Index

    A statistical measure of change in an economy or a securities ...
  3. Down Volume

    A stock volume that closes at a price lower than the previous ...
  4. Volume

    The number of shares or contracts traded in a security or an ...
  5. Up Volume

    A stock volume that closes at a price higher than the previous ...
  6. Indicator

    Indicators are statistics used to measure current conditions ...
RELATED FAQS
  1. What are the best technical indicators to complement the Positive Volume Index (PVI)?

    Some of the best technical indicators to complement use of the positive volume index (PVI) are the negative volume index ... Read Full Answer >>
  2. What are the best technical indicators to complement the Negative Volume Index (NVI)?

    The negative volume index (NVI) was not created to be used as the basis for a stand-alone trading strategy. Therefore, it ... Read Full Answer >>
  3. What is a common strategy traders implement when using the Negative Volume Index ...

    A common strategy traders implement using the negative volume index (NVI) is to use it to help obtain a more optimal trade ... Read Full Answer >>
  4. What is the Negative Volume Index (NVI) formula and how is it calculated?

    There are two distinct versions of the Negative Volume Index, or NVI, along with one hybrid version that draws from both. ... Read Full Answer >>
  5. Why is the Negative Volume Index (NVI) important for traders and analysts?

    The Negative Volume Index (NVI), along with its cousin the Positive Volume Index (PVI), is one of the oldest technical indicators ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Confirming Price Movements With Volume Oscillators

    Use this indicator to validate a change in price direction and moving averages.
  2. Technical Indicators

    Simple Moving Averages And Volume Rate-of-Change

    We teach you how to confirm buy and sell signals by comparing two very simple indicators.
  3. Technical Indicators

    On-Balance Volume: The Way To Smart Money

    This momentum indicator was designed to predict when major market moves would occur.
  4. Options & Futures

    How To Use Volume To Improve Your Trading

    Volume is a simple yet powerful way for traders and investors to increase their profits and minimize risks.
  5. Technical Indicators

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  6. Active Trading

    An Introduction To The Relative Strength Index

    Learn the difference between relative strength and the relative strength index, a frequently used technical analysis oscillator.
  7. Options & Futures

    Options Trading Volume And Open Interest

    Learn how these two statistics can give you an edge in trading options.
  8. Chart Advisor

    4 Bullish Flag Patterns You Should Trade Now

    Here are four stocks with flag patterns, highlighting the various ways to trade this chart pattern.
  9. Chart Advisor

    These Transportation Stocks Are at a Crossroads

    These shipping and railroad stocks are testing resistance. A break above signals an emerging uptrend; a break lower, a continuation of the downtrend.
  10. Technical Indicators

    Trade This High Probability Bollinger Band Pattern

    Bollinger Band box patterns set up profitable opportunities when trends give way to well organized trading ranges.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center