Negative Volume Index (NVI)
The Negative Volume Index, or NVI, is a technical analysis indicator used to measure the buying and selling pressure of an asset by comparing volume on days where prices fell to days when prices increased. It was developed in the early 20th century by Paul Dysart and introduced in his book The Stock Market Barometer.
The index works as follows: When volume decreases on down-days compared to up-days, it suggests that there is more demand than supply for the asset; this indicates bullish sentiment and could be a sign of an impending price increase. Conversely, if volume increases on down-days compared to up-days, it often signals bearish sentiment which may lead to further downward price movements.
To calculate NVI, one must first identify all nonzero trading volumes from historical data points over a given period (e.g., weekly or monthly). For each day with decreasing closing prices relative to previous days’ closing values (i.e., “down” days), you would subtract the corresponding volume from yesterday’s cumulative total; for each day with increasing closing prices relative to prior periods’ closing values (i.e., “up” days), you would add the corresponding volume onto yesterday’s cumulative total. After these calculations have been completed across all time periods considered, simply divide today’s cumulative value by yesterday’s and multiply by 100 — this will give you your NVI reading at any point in time!
In conclusion, while not as widely known as other popular indicators such as Moving Averages or Parabolic SARs , Negative Volume Index can still provide valuable insights into market sentiment that investors should keep an eye out for when making investment decisions related cryptocurrencies .
