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Negative Volume Index (NVI)

Negative Volume Index (NVI) Definition

The Negative Volume Index (NVI) is a technical indicator used in the analysis of financial markets, including cryptocurrency markets. It is used to identify trends and reversals by focusing on periods where the volume decreases from the previous period. The NVI is based on the assumption that the “smart money” takes positions during these quiet periods.

Negative Volume Index (NVI) Key Points

  • The NVI is a technical analysis tool used to identify market trends and reversals.
  • It focuses on periods where trading volume decreases from the previous period.
  • The NVI is based on the assumption that informed investors or “smart money” make moves during quiet periods.
  • It is used in various financial markets, including the cryptocurrency market.

What is the Negative Volume Index (NVI)?

The Negative Volume Index is a technical indicator that was developed by Paul Dysart in the 1930s. It is based on the premise that smart money, or informed investors, tend to be more active on days when volume decreases. The NVI is calculated by comparing the current period’s volume to the previous period’s volume. If the current volume is less, the NVI is calculated. If the current volume is more, the NVI remains the same as the previous period.

Why is the Negative Volume Index (NVI) Important?

The NVI is important because it helps traders and investors to identify potential market trends and reversals. By focusing on periods of decreased volume, it provides insights into the actions of informed investors. This can help traders and investors to make more informed decisions and potentially improve their trading performance.

Who Uses the Negative Volume Index (NVI)?

The NVI is used by traders and investors who use technical analysis to guide their trading decisions. This includes both individual retail traders and professional traders at financial institutions. It is used in various financial markets, including the stock market, the forex market, and the cryptocurrency market.

When to Use the Negative Volume Index (NVI)?

The NVI is typically used in conjunction with other technical indicators to confirm trends and signals. It is most useful during periods of market uncertainty or volatility, as it can help to identify the actions of informed investors. It is also useful for identifying potential market reversals.

How is the Negative Volume Index (NVI) Calculated?

The NVI is calculated by comparing the current period’s volume to the previous period’s volume. If the current volume is less than the previous volume, the NVI is calculated by adding the percentage change in price to the previous NVI. If the current volume is more than the previous volume, the NVI remains the same as the previous period.

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