Negative and Positive Volume Index: separating the crowd from the informed

What it measures

The Negative Volume Index only changes on bars where volume fell from the previous bar. The Positive Volume Index only changes on bars where it rose.

The theory, from Fosback, is that informed money trades on quiet days and the crowd trades on busy ones — so NVI tracks the smart money and PVI tracks the crowd.

Whether or not that theory holds, the two series answer a genuinely different question from any other volume indicator: what happened specifically on quiet days.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Start both indices at an arbitrary base, conventionally one thousand.

2. 2

   If volume fell from the previous bar, add the percentage price change to NVI and leave PVI unchanged.

3. 3

   If volume rose, add the percentage price change to PVI and leave NVI unchanged.

4. 4

   A one-year moving average of each is the conventional signal line.

Settings

The two hundred and fifty-five period signal average is the Fosback original, which is one trading year on a daily equity chart. On a crypto daily chart, three hundred and sixty-five is the honest equivalent.

How to read it

• NVI above its own long moving average is the classic bull-market signal in the original work.
• The two series diverging means quiet days and busy days are telling different stories, which is the entire reason to plot both.
• The absolute levels are arbitrary and only movement relative to their own averages matters.
• Both are slow by construction and were built for daily charts and multi-month readings.
• Even setting the theory aside, plotting both and watching the gap between them is a clean way to see whether a move is being carried by busy bars or quiet ones — which is a factual question the indicator answers well regardless of who is doing the trading.

Where it misleads

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