Description

• Founded by Norman Fosback, NVI attempts to show actions of smart investor, as they are drivers of stock movement
• Norman believed in smart money flow and taking position on the day of low volume, while crowd reacts more on noisy days when volume is heavy
• High indicator value is indicative of smart & professional money flowing in the market. As experts enter when markets are silent

Interpretation

• If price closes above its previous close and volume is lower than previous bar, it’s a buy signal
• If price closes below its previous close and volume is higher than previous bar, it’s a sell signal
• Along with NVI, its average can be plotted for crossover signals

Default Parameters Used/Inputs

• Price
• Close rate, Previous close rate
• Volume
• Number of shares traded on the bar

Returns/Output

Negative Volume Index values of stock

Formula

For NVI, if volume0 < volume-1 than
NVI = NVI-1 + [((Close rate – Close rate-1)/Close rate-1 ) * NVI-1 ]
Else, NVI = NVI-1