Negative Volume Index: Volume-Based Trend Confirmation and Divergence
Summary
The Negative Volume Index (NVI) updates on bars whose volume is lower than the preceding bar’s volume. The document describes using NVI movement to assess whether a price trend persists despite declining volume. A crossover between NVI and its moving average can serve as trend confirmation, though it may lag or produce false signals.
It also outlines divergence analysis: if price makes higher highs while NVI weakens, traders may watch for a possible reversal, but the signal can be unclear and should be confirmed with other evidence. The indicator implementation described supports displaying a higher-timeframe NVI on a lower-timeframe chart and can switch to the Positive Volume Index, which tracks price changes on rising-volume bars. Calculations may use tick volume or, where available, real volume. The document explains these interpretations but provides no performance tests or evidence that the signals are profitable.
Key ideas
- NVI changes only on bars with lower volume than the previous bar.
- A moving-average crossover can be used as trend confirmation, with lag and false signals as risks.
- Price and NVI divergence may suggest a reversal but calls for additional confirmation.
- The indicator can display higher-timeframe values and can be switched to PVI.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.