Negative Volume Index: Volume-Conditioned Trends and Divergence
Summary
The Negative Volume Index (NVI) updates on bars when volume is lower than on the preceding bar, creating a separate line intended to track price movement during quieter trading. The document describes a classic interpretation in which NVI moving above or below its moving average confirms a market trend, on the premise that strong trends can persist on declining volume. It also outlines divergence analysis: if price makes higher highs while NVI weakens, traders may watch for a possible reversal. A version of the indicator can display higher-timeframe readings on a lower-timeframe chart and can switch to the Positive Volume Index, which focuses on price changes during rising volume.
The discussion gives no performance tests or quantitative evidence for these uses. Moving-average crossings may lag or produce false signals, and divergences can be unclear or inaccurate, so the document recommends additional confirmation. It also notes that results depend on the volume series: the described platform implementation uses tick volume by default, with real volume available in MT5. Higher-timeframe volume differences can change the shape and interpretation of the NVI curve.
Key ideas
- NVI changes only on bars whose volume is below the preceding bar's volume.
- A moving-average cross on NVI can be used as a trend-confirmation signal.
- Price and NVI divergence may flag a possible reversal, but signals can be ambiguous.
- Higher-timeframe NVI can provide a different view from calculations on the chart timeframe.
- The indicator can switch to PVI and may use tick or real volume depending on platform settings.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.