Negative Volume Index (NVI)
Instead of tracking volume spikes, the NVI watches what happens when volume dries up, helping traders identify quiet accumulation, trend confirmations, and early signs of institutional positioning.
How NVI Works
The NVI only updates when the day’s volume is lower than the previous day. When volume drops:
If price increases, the NVI goes up
If price decreases, the NVI goes down
If volume increases, the NVI stays the same
This logic creates a cumulative line that tends to mirror price, but offers unique clues about hidden strength or weakness.
| Volume Behavior | NVI Reaction |
|---|---|
| Volume ↓ and Price ↑ | NVI increases → possible accumulation |
| Volume ↓ and Price ↓ | NVI decreases → possible distribution |
| Volume ↑ | No NVI update → not a “smart money” day |
Most traders use a 1,000 baseline to track whether the NVI is rising or falling relative to that long-term threshold.
How Traders Use It
The NVI is often paired with a moving average (usually 255-day EMA) to help confirm market bias:
If NVI is above the moving average, it suggests a bullish environment
If NVI is below, the bias may be bearish
Divergences between price and NVI can hint at fading momentum or hidden strength
Here’s how it’s commonly used:
Trend Confirmation
Use the NVI to confirm if a breakout is supported by smart money behavior.
Bullish Divergence
Price makes new lows, but NVI forms higher lows on low volume — a possible reversal signal.
Bearish Divergence
Price climbs, but NVI lags behind — a red flag that the move may lack solid backing.
Example Setup
You’re analyzing an index ETF that’s rising gradually. However, daily volume is lower than the previous day, and NVI is quietly pushing higher.
That’s a green flag.
Smart money could be accumulating during the quiet stretch. You enter the trend early—before retail traders pile in on high-volume days. Later, when the move accelerates and volume spikes, you’re already positioned.
This kind of early signal is what makes NVI so valuable.
Pros and Cons of Using RSI
Pros
Highlights subtle accumulation or distribution
Useful for confirming smart money behavior
Filters out noise from high-volume public-driven days
Strong when paired with price action or moving averages
Cons
Doesn’t update on high-volume days
May lag in fast-moving markets
Best suited for swing or long-term trades—not intraday use
When to Use the Negative Volume Index
Use NVI when you want to track smart money quietly entering or exiting positions. It works best on daily or higher timeframes and adds real value to trend confirmation strategies or divergence spotting.
If you’re serious about understanding who is behind the move, the Negative Volume Index helps you decode market activity during the calm—not just the chaos. Next up lets switch it up with the Positive Volume Index (PVI)