The Negative Volume Index (NVI) is a technical indicator used to identify trends in a market. It is a cumulative indicator, which means that all changes to the ...NegativeVolumeIndex(NVI)AtechnicalindicatorusedtoidentifytrendsinamarketHome›Resources›Knowledge›Trading&Investing›NegativeVolumeIndex(NVI)WhatistheNegativeVolumeIndex(NVI)?TheNegativeVolumeIndex(NVI)isatechnicalindicatorusedtoidentifytrendsinamarket.Itisacumulativeindicator,whichmeansthatallchangestotheindicatoraccumulate.Putanotherway,thevaluesusedintheindicatorinthecurrentperiod,willbeused infuturevaluesforthepreviousperiod.TheindicatorwasfirstdevelopedbyAmericanstockmarketStockMarketThestockmarketreferstopublicmarketsthatexistforissuing,buyingandsellingstocksthattradeonastockexchangeorover-the-counter.Stocks,alsoknownasequities,representfractionalownershipinacompanytechnicianPaulDysartinthe1930s,buttheversionofthequantitativeversionoftheindicatorthatisusedtodaywasdevelopedbystockmarketeconometricianNormanFosbackin1976.Thefollowingsectionsdiscusstheintuitiveideabehindtheindicator,thecalculationoftheindicator,andabacktestbasedonasimpleNVIstrategy. BackgroundandTheoryTheideabehindtheNegativeValueIndex(NVI)isthatifatrendcontinuesevenastradingvolumefalls,itisastrongtrend.Thebeliefhereisthathightradingvolumeisaresultofuninformativetraders.Ontheotherhand,itisassumedthatonlowtradingvolumedays,itisthemoreinformedtradersor“smartmoney”atplay.Hence,theultimateinferencebeingthatifthepricecontinuestoriseevenonlowvolumedays,itisastrongsignalthattheupwardtrendinpricewillcontinue. CalculatingtheNVIBelowisasimplestep-by-stepprocesstocalculatetheNegativeValueIndex(NVI).Step1:SettheNVIlevelonthestartingdateataroundfigure.Thetypicalbaselevelis1,000.Othercommonlyusedlevelsare1and100.Step2:Forthefollowingperiod,ifthevolumegoesup,thentheNVIforthatperiodwillbethesameasthatofthepreviousperiodStep3:Ifthevolumegoesdownduringagivenperiod,thentheNegativeVolumeIndexisgivenbythefollowingformula:  Where:NVIt– NegativeVolumeIndexattime