The Negative Volume Index (NVI) is a compelling technical indicator that blends volume and price to visually represent how price changes are influenced on days with declining volume.
Key Insights
- The NVI uniquely integrates volume and price to graph essential price changes during low volume days.
- Its trendlines may offer valuable insights into mainstream and smart money trends, often indicative of institutional investors’ actions.
- Using the NVI alongside the Positive Volume Index (PVI) can provide a comprehensive overview of how volume influences price shifts.
Delving Into The Negative Volume Index (NVI)
The Negative Volume Index (NVI) complements the Positive Volume Index (PVI). Both were initially developed in the 1930s by Paul Dysart and gained prominence in the 1970s through Norman Fosback’s
Related Terms: Positive Volume Index, PVI, institutional investors, technical indicators, volume analysis, candlestick charting.
References
Get ready to put your knowledge to the test with this intriguing quiz!
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## What is the Negative Volume Index (NVI)?
- [ ] An index that measures positive volume changes in the market
- [x] An index that focuses on days when trading volume decreases
- [ ] An index that measures negative price movements
- [ ] An index that tracks the overall market volume
## Who introduced the Negative Volume Index?
- [ ] Warren Buffet
- [ ] Peter Lynch
- [ ] John Burr Williams
- [x] Paul Dysart
## The Negative Volume Index (NVI) is primarily used in conjunction with which other index?
- [ ] Dow Jones Industrial Average (DJIA)
- [ ] S&P 500
- [x] Positive Volume Index (PVI)
- [ ] NASDAQ Composite
## How is the Negative Volume Index (NVI) calculated?
- [ ] By taking the cumulative total of price gains
- [x] By adjusting the previous index value up or down based on the day's price change when the day's volume is lower than the previous day
- [ ] By summing up all negative price movements
- [ ] By averaging the volume percentage changes
## What does a rising NVI typically indicate?
- [ ] Increasing trading volume
- [x] Strong market participation from informed traders during periods of low volume
- [ ] Decreasing market confidence
- [ ] Market speculation
## In technical analysis, what is a common use of NVI?
- [ ] To predict short-term market trends
- [x] To identify market trends during lower trading volumes
- [ ] To identify periods of high market volatility
- [ ] To determine optimal pivot points
## Which type of investor is believed to control the market when the NVI is rising?
- [ ] Retail investors
- [ ] Day traders
- [x] Smart money or informed investors
- [ ] High-frequency traders
## How do traders interpret a crossover between NVI and its moving average?
- [ ] As a signal to invest in bonds
- [x] As a potential buy or sell signal based on the crossover direction
- [ ] As an indication to avoid trading
- [ ] As an irrelevant market occurrence
## What period of moving average is commonly used with NVI?
- [ ] 200-day moving average
- [x] 255-day moving average
- [ ] 50-day moving average
- [ ] 10-day moving average
## What kind of market condition does a declining NVI potentially signal?
- [ ] A bull market
- [x] A bear market
- [ ] Horizontal market movement
- [ ] A peak market condition
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