Classic NVI/PVI Fosback

Overview

The Negative Volume Index (NVI) and Positive Volume Index (PVI) are classic volume-based indicators developed by Norman Fosback in his 1976 book "Stock Market Logic". These indicators help identify smart money (institutional) vs. crowd (retail) activity by tracking price changes on days with decreasing or increasing volume.

How It Works

NVI (Negative Volume Index)

• Updates only when today's volume is lower than yesterday's
• Low volume days are believed to reflect "smart money" activity
• When NVI is above its moving average → bullish signal (historically 96% chance of bull market)

PVI (Positive Volume Index)

• Updates only when today's volume is higher than yesterday's
• High volume days typically reflect retail/crowd participation
• Less reliable than NVI but useful for confirming trends

Interpretation

• Index > Signal Line → Bullish trend (green)
• Index < Signal Line → Bearish trend (red)
• NVI cross above MA → Bull market likely starting
• NVI cross below MA → Bear market warning

Settings

• Indicator Type (default: NVI) — Choose between NVI or PVI
• Signal Line Period (default: 255) — SMA period, Fosback's original setting equals approximately 1 trading year
• Starting Value (default: 100) — Base value for index calculation

Recommended Timeframes

• Daily ⭐⭐⭐⭐⭐ — Primary recommended timeframe
• Weekly ⭐⭐⭐⭐ — Long-term trend confirmation
• 4H ⭐⭐⭐ — Swing trading on liquid assets
• 1H and below ⭐⭐ — Not recommended due to volume noise

Best Practice: Use on Daily charts with the default 255-period SMA for authentic Fosback methodology.

Best Suited For

• Indices: S&P 500, NASDAQ, Dow Jones
• ETFs: SPY, QQQ, IWM
• Large-cap stocks: High liquidity ensures meaningful volume data
• Forex: Less effective due to decentralized volume data
• Crypto: Use with caution as 24/7 markets distort daily volume patterns

Trading Tips

1. Primary signal: NVI crossing above 255 SMA = strong bull market indicator
2. Confirmation: Use PVI to confirm retail participation in rallies
3. Divergence: If price rises but NVI falls → smart money distribution
4. Combine with: Price action, support/resistance levels, trend indicators