# Negative Volume Index A Volume & Order Flow concept (Cumulative flow lines) in the LuxAlgo Library, with 1 indicator implementation. ## What is the Negative Volume Index? The Negative Volume Index (NVI) is a cumulative line that changes only on sessions when volume falls below the prior session's volume. On those quiet days the line moves by the day's percentage price change; on rising-volume days it stays flat. Created by Paul Dysart in the 1930s and refined by Norman Fosback in 1976, it rests on one premise: the crowd trades the loud days while informed money positions on the quiet ones, so price behavior on falling-volume days is worth isolating. The absolute level is arbitrary (the line is usually seeded at 1000), so NVI is read by slope and by position against a long average of itself, conventionally a one-year (255-day) EMA. Above the average is treated as a healthy primary trend; below it, as quiet-day distribution. It is a slow, regime-scale tool rather than a timing signal. The history explains the two versions in circulation. Dysart built his index in the 1930s from advance-decline data on falling-volume days; Fosback's 1976 book Stock Market Logic redefined it on percentage price change and popularized the one-year-average signal, reporting very high historical odds of a bull market when NVI sat above that average. Those hit rates came from mid-century index data, and later replications find the edge smaller and period-dependent, so the honest reading is that the above-average condition has historically been a decent description of healthy primary trends, not a forecast with printed odds. Modern practice keeps NVI in the slow lane and mostly on broad indices, where day-to-day volume comparisons mean something; single names and thin markets add noise the premise cannot carry, and its quiet-day definition, yesterday's volume versus today's, is a cruder cut than [relative volume](https://www.luxalgo.com/library/concept/relative-volume/) baselines. The design also lives on inside composites: DonovanWall's Dual Volume Divergence Index derives positive and negative volume flows in the NVI tradition and reads their disagreements with price as [volume divergence](https://www.luxalgo.com/library/concept/volume-divergence/), turning a 1930s regime line into an oscillator with modern smoothing. ## How to identify the Negative Volume Index on a chart NVI is defined by what it ignores. Reading it is mostly about respecting that filter and the slow timescale it implies. 1. Each session, compare volume with the prior session; only sessions with lower volume are allowed to move the line. 2. On those quiet sessions, multiply the line by one plus the day's percentage price change; on all other sessions carry it flat. 3. Overlay the conventional signal: a one-year (255-day) EMA of the line itself. 4. Read regime, not wiggles: position above or below the long average and the slope of the line are the outputs; day-to-day changes are noise by construction. 5. Cross-check against the mirror series and a cumulative all-days line such as [OBV](https://www.luxalgo.com/library/concept/obv/), since agreement across volume lines is the classic stronger read. ## How it's calculated A cumulative index that moves only on lower-volume days, tracking how price behaves when activity dries up. ``` If V_t < V_{t-1}: NVI_t = NVI_{t-1} × (1 + (C_t - C_{t-1}) / C_{t-1}) If V_t >= V_{t-1}: NVI_t = NVI_{t-1} Seed: NVI_0 = 1000 Signal_t = EMA_255(NVI) V_t: volume of bar t C_t: close of bar t t: bar index (daily in the classic form) NVI_t: Negative Volume Index value NVI_0: seed value (commonly 1000; some platforms use 100) EMA_255(NVI): 255-day exponential moving average of NVI, about one trading year Signal_t: Fosback's signal line ``` Paul Dysart's 1930s original accumulated raw changes on lower-volume days; Norman Fosback's percent-change form shown here is the modern standard. Fosback read NVI above its one-year EMA as strong evidence of a bull market in force. Pairs with the Positive Volume Index, which updates only when volume rises. ## How traders use it - As a long-horizon trend filter: NVI above its one-year EMA supports a bullish bias, and a cross below is a caution flag that gains weight when other breadth or volume evidence agrees. - Paired with the [Positive Volume Index](https://www.luxalgo.com/library/concept/positive-volume-index/): NVI rising while PVI stalls is read as accumulation without crowd participation, and the two agreeing (both above or both below their averages) is the stronger classic configuration. - As a divergence input: NVI trending down while price makes new highs flags that quiet-day flows are leaning against the tape, the same logic as [OBV Divergence](https://www.luxalgo.com/library/concept/obv-divergence/) applied to a filtered subset of days. - As the slow layer in volume dashboards: a regime line checked weekly beside faster per-bar flow reads, where its job is context rather than triggers. - As an engine inside derived oscillators: the Dual Volume Divergence Index builds NVI-style and PVI-style flows, smooths them, and flags their divergences against price, trading the concept at oscillator speed. ## Negative Volume Index vs other volume lines - **OBV** (https://www.luxalgo.com/library/concept/obv/): OBV moves every session, adding or subtracting the whole day's volume by the sign of the close. NVI ignores most days entirely and accumulates percentage price change only when volume fell. One is a running vote of all activity; the other deliberately listens to the quiet minority of days. - **Positive Volume Index** (https://www.luxalgo.com/library/concept/positive-volume-index/): The exact mirror: PVI updates only on rising-volume days, tracking what the crowd does when activity expands. Fosback read NVI as the informed series and PVI as the crowd series, and treated agreement between the two, both above or both below their yearly averages, as the strongest configuration. - **Money Flow Index** (https://www.luxalgo.com/library/concept/money-flow-index/): MFI is a bounded 0-100 oscillator weighting typical price by volume over a short window, built for overbought and oversold reads. NVI is an unbounded cumulative line read against a one-year average. They share the volume input and nothing else: one times swings, the other describes regimes. ## FAQ ### How is the Negative Volume Index calculated? Seed the line at an arbitrary base such as 1000. Each session, compare volume with the previous session. If volume is lower, multiply the line by one plus the day's percentage price change; if volume is equal or higher, leave it unchanged. A one-year (255-day) EMA of the line is the conventional signal overlay. ### Is a rising NVI bullish? In Fosback's reading, yes: it means price has been advancing on declining-volume sessions, which he attributed to informed accumulation. The classic signal is position above or below the one-year average rather than day-to-day wiggles, and like any single cumulative indicator it lags at turns and produces false signals, so it works best as a backdrop filter. ### Why is the signal average one year long? That is Fosback's published convention, 255 trading days, chosen to make the line answer a primary-trend question rather than a swing question. NVI only moves on a subset of days, so shorter averages chase a sparse, jumpy series. Platforms let you change the length, but shortening it converts a regime tool into a noisy timing tool without making it a good one. ### What did Fosback's research actually claim? In Stock Market Logic he reported that when NVI stood above its one-year average, the market was in a bull phase the overwhelming majority of the time in his mid-century sample. The number is real but the sample is old, and modern replications generally find a weaker, period-dependent edge. Treat the above-average condition as historical context in favor of the trend, not as printed odds. ### Does NVI work on individual stocks or crypto? It was designed and tested on broad equity indices, where day-over-day volume comparisons reflect genuine participation shifts. Single stocks inject earnings dates, rebalances and idiosyncratic noise into the volume comparison, and crypto volume differs wildly across venues and includes questionable prints. The concept transfers, but expect more noise and validate before trusting it outside index work. ### Should I use NVI or PVI? Fosback's own finding was that NVI carried the stronger historical signal, with PVI describing the crowd's behavior on active days. In the classic framework you use both: NVI above its yearly average as the core health check, PVI as the confirming voice, and disagreement between them as the interesting condition flagging quiet accumulation or loud distribution. ## Implementations in the Library - Negative Volume Index (LuxAlgo): https://www.luxalgo.com/library/indicator/negative-volume-index/ ## Related concepts - Money Flow Index: https://www.luxalgo.com/library/concept/money-flow-index/ - Weis Wave Volume: https://www.luxalgo.com/library/concept/weis-wave-volume/ - OBV: https://www.luxalgo.com/library/concept/obv/ - OBV Divergence: https://www.luxalgo.com/library/concept/obv-divergence/ - Accumulation/Distribution Line: https://www.luxalgo.com/library/concept/accumulation-distribution-line/ - Chaikin Oscillator: https://www.luxalgo.com/library/concept/chaikin-oscillator/ - Chaikin Money Flow: https://www.luxalgo.com/library/concept/chaikin-money-flow/ - Twiggs Money Flow: https://www.luxalgo.com/library/concept/twiggs-money-flow/ - Williams A/D: https://www.luxalgo.com/library/concept/williams-a-d/ - Price Volume Trend: https://www.luxalgo.com/library/concept/price-volume-trend/ --- Source: https://www.luxalgo.com/library/concept/negative-volume-index/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/