What is Negative Volume Index indicator (Strategy)

In a simple word, the Negative volume index (NVI) will tell you, the price can move by smart money in the lower volume.

smart money can change price movement in a lower volume. This indicator will change in lower volume if smart money is active.

The indicator line will unchanged when the volume is increasing.

NVI indicator setting

negative volume index setting
  • Field: The Default field is ‘ close’. This means the period closing price will take to calculate this indicator. Other field options available also, like, opening price, high price, low price, etc, etc available.
  • Moving average Type: default Moving average type is ‘ Simple’. This means the moving average line will be a simple moving average. Also other moving average types available like, Exponential, time series, triangular, variable, etc, etc.
  • Period: The default period is 255. The simple moving average calculation will base on a 255-period closing price.
  • Index: this is the Negative Volume index Line color.
  • MA: This is the 225-period moving average line color.

Negative Volume index calculation

  • This Index line will move volume is decreasing than the previous Volume.
  • Formula: previous Index +[{(Close – Previous close)÷ previous Close} × previous Index]
  • When volume is higher than the previous Volume, the index line will unchanged.

Negative Volume index trading strategy

Strategy 1

NVI indicator has 2 lines (Index line & MA Line). If the Index line is crossing the MA line, then share price can rise. So you can buy shares at this position.

Negative Volume Index strategy

If the index line is crossing the MA line, and moving downward direction. then share price can fall. You can sell at this position.

Strategy 2

  • Buying signal: You can use the NVI indicator with a combination of RSI indicators.
  • So in the NVI Indicator, if Index line crossing MA line and Index Line moving upward direction, This is the buying signal in the NVI Indicator.
  • Also Set RSI Indicator period 255 period ( same like NVI indicator period). So if the RSI indicator is above the 50 level, this is the bullish signal in RSI Indicator.
  • So when both Indicators give a buying signal, then you can buy the stock.
  • Selling Signal: If the index is crossing the MA line and moving downward direction. This is the selling signal in NVI Indicator.
  • Also, if the RSI Indicator is below the 50 level, this is the bearish Signal in RSI.
  • So when both Indicators are giving selling Signal. Then you can sell.

Conclusion

Negative Volume Index (NVI) tells you, the price will move by smart money when the volume is decreasing.

NVI will rise when the price is rising and volume is decreasing. And NVI will not change if the volume is increasing & price actions will not matter.

Using this indicator with the MA line, gives you a bullish and bearish signal, buying, and selling Position. also, show you the trend.

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