Description:
The Net Volume Index (NVI) is a technical indicator used in financial markets to gauge the strength of price trends. Developed by Walter Schloss, it operates on the principle that volume often precedes price movement. Calculated by starting with a base value, typically 1000, and adjusting it based on whether the closing price is higher or lower than the previous period, the NVI accumulates volume by price direction.
Input Parameters:
- Length: Number of periods used in the calculation.
- MA Type: Select the moving average type such as EMA, SMA, or HullMA.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Trend Confirmation: Traders use NVI to confirm the validity of price trends. When the NVI is rising alongside rising prices, it confirms a bullish trend, suggesting strong buying pressure. Conversely, a falling NVI along with falling prices confirms a bearish trend, indicating strong selling pressure.
- Divergence Analysis: NVI divergence can provide early signals of potential reversals. For instance, if prices are rising while the NVI is falling, it may indicate weakening buying pressure, potentially signaling a trend reversal to the downside, and vice versa.
- Volume Analysis: NVI incorporates volume data, making it a useful tool for analyzing volume patterns. Traders can observe how volume changes correspond to price movements, helping them understand the underlying dynamics of market trends.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more about other volume indicators? Check out our blogpost.