Negative volume index
TrendIntermediate
The negative volume index changes only on days when volume falls versus the prior day. The idea, associated with Paul Dysart and Norman Fosback, is that quieter days say more about the underlying trend than crowd-driven high-volume days. It is the opposite construction from on-balance volume, which updates every day.
Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.
- Rules
- Start the index at a base value. On days when volume is below the prior day, move the index by that day's percentage price change. On higher-volume days, leave it unchanged. Use a rising NVI as a trend filter for longs and a falling NVI as a reason to be flat or defensive. Pair it with a price stop. Do not treat one quiet day as a signal.
- Where AI fits
- AI can test the 'volume fell' rule against a simple trend rule and report whether the filter changes drawdowns or only cuts the number of days in the market. It should use split-adjusted prices and a consistent volume field. Searching for a volume-drop threshold after seeing the equity curve is leakage.
- Markets
- Stocks and equity indexes with a continuous volume series.
- Timeframes
- Daily.
- Risks
- If quiet days are just low-liquidity noise, the index tracks nothing useful. The series is slow and can stay on the wrong side of a bear market. It is not comparable across assets with different volume regimes.