Negative Volume Index - NVI

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.

BREAKING DOWN '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. Up Volume

    A stock volume that closes at a price higher than the previous ...
  3. Volume Of Trade

    The total quantity of futures contracts bought and sold during ...
  4. Volume Analysis

    The examination of the number of shares or contracts of a security ...
  5. Net Volume

    A term in technical analysis that represents a security's uptick ...
  6. Downtick Volume

    The share volume of a security that trades at a price lower than ...
Related Articles
  1. Trading

    Essential Strategies For Trading Volume

    Looking to trade using volume? Have a look at these essential tips.
  2. Trading

    Market Breadth: Volume Studies

    Fortunately, the basic signals conveyed by volume data are easy to read. When a stock is traded, the transaction is recorded and included in the daily volume. When volume levels spike for a ...
  3. Trading

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
  4. Trading

    Confirming Price Movements With Volume Oscillators

    Use this indicator to validate a change in price direction and moving averages.
  5. Trading

    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.
  6. Trading

    How To Tackle Intraday Volume

    Measure the flow of intraday volume to estimate the emotional intensity of the crowd.
  7. Trading

    Using Volume Rate Of Change To Confirm Trends

    Wise traders rely on indicators that show a trend in volume, because without supportive volume, a price movement has no conviction.
  8. Managing Wealth

    Use Market Volume Data to Determine a Bottom

    Market bottoms often carve out classic volume patterns that let observant traders make fast and accurate calls.
  9. Trading

    What's In Store For These Stocks With Unusually High Volume?

    For these four stocks with recent usually high volume, the overall technical picture will be used to help gauge in which direction the next tradable moves will be.
  10. Trading

    Exploring Oscillators and Indicators: On-Balance Volume

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The on-balance volume indicator (OBV) is one of the most well-known technical indicators and it focuses on the importance ...
RELATED FAQS
  1. Why is the Negative Volume Index (NVI) important for traders and analysts?

    Dive into the theory and history of the Negative Volume Index (NVI), a volume-based indicator used to identify and qualify ... Read Answer >>
  2. What is a common strategy traders implement when using the Negative Volume Index ...

    Learn a simple trading strategy that can be created using just a couple of moving averages and the negative volume index ... Read Answer >>
  3. What is the Negative Volume Index (NVI) formula and how is it calculated?

    Read about the Negative Volume Index, or NVI, a momentum indicator experiencing serious modifications since its introduction ... Read Answer >>
  4. What is a common strategy traders implement when using the Positive Volume Index ...

    Read about the most common trading signals and strategies used by technical investors in conjunction with the positive volume ... Read Answer >>
  5. Why is the Positive Volume Index (PVI) important for traders and analysts?

    Take a closer look at the positive volume index, which is a technical price volume indicator used to identify possible bear ... Read Answer >>
  6. What are the best technical indicators to complement the Positive Volume Index (PVI)?

    Discover several of the best technical indicators that traders and market analysts use in conjunction with the Positive Volume ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center