Hence, we can define the Negative Volume Index as a cumulative total of fractional ratios of net price change for decreasing volume days only.NegativeVolumeIndexindicator:Whatisit?VolumeindicatorsTheNegativeVolumeIndex(NVI)indicatorshowshowdownvolumedaysimpactprice.Itaimsatreflectingthemindsetofthesmartmoneyprofessionals.PaulDysartinventedtheNegativeVolumeIndex(NVI)indicator.ItwatchesthetradevolumeandPaulconsideredtradevolumethemostimportantmarketindicator.TheNVIindicatorhighlightsthedaysandweeksduringwhichthetradingvolumedecreases.Italsocomparespricechangesonthosedays. Aswealreadyknowthatexpertstradeduringrelativelyquietperiodsofdecreasingvolume.Ontheotherhand,novicesandunprofessionaltradersgetactiveduringperiodsofrisingvolume.Therefore,theactivityduringtheperiodsofdecliningvolumeshouldbetterreflectthethinkingofthesmart-moneyprofessionals.AndthatisexactlytheideabehindthedevelopmentoftheNegativeVolumeIndextoreflectthemindsetofthesmartmoneyprofessionalswhoinvolveintradingduringperiodsofdecliningvolume.Whatyou'lldiscoverinthisarticle++show++1HowtocalculatetheNegativeVolumeIndex?2HowdoestheNVIindicatorwork?3WhatdoestheNegativeVolumeIndextelltraders?HowtocalculatetheNegativeVolumeIndex?TraderscancalculatetheNVIforanytimeperiodrangingfromminutestomonths.TraderscanalsocalculatetheNVIusinganymarketindex,commodity,orstock.ThecalculationoftheNVIindicatordependsonhowthevolumehaschangedfromthetradingvolumeofthepreviousday.However,theNVIwillonlychangewhenthenegativechangestakeplace.ThatmeanstheNVIindicatorwillcalculateonlyifthecurrentvolumeislowerthanthepreviousday.TheformulafortheNegativeVolumeIndexis:NegativeVolumeIndex=PreviousNVI+{(Today’sClosingPrice–Yesterday’sClosingPrice)/Yesterday’sClosingPrice×PreviousNVI}HowdoestheNVIindicatorwork?TheNegativeVolumeIndexreliesonthevolume.VolumeisthebasisoftheworkingoftheNVIindicator.Thevolumeactsasaqualifiertodecidewhetherornottoincludetoday’sfractionalratioofnetpricechangeinthecumulativetotal.Iftoday’svolumeislessthanthevolumeofyeste