Net Volume

Name Type Prerequisite Use Cases
Net Volume (NV) Volume Price & Volume Visualizes net capital flow into or out of an asset.

Definition

Net Volume is a simple indicator that calculates the net buying or selling pressure for a given period. It is typically calculated by multiplying the volume by the sign of the price change. If the price closes higher, the volume is considered positive; if lower, negative.

Mathematical Equation

\[ \text{Net Volume}_t = Volume_t \times \text{sign}(Close_t - Close_{t-1}) \]

Where:

  • \(\text{sign}(x) = 1\) if \(x > 0\)

  • \(\text{sign}(x) = -1\) if \(x < 0\)

  • \(\text{sign}(x) = 0\) if \(x = 0\)

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: Unbounded
  • Behavior: Fluctuates up and down showing the difference between up-volume and down-volume.

Visualization

Net Volume

Trading Significance

  1. Buying/Selling Pressure: Positive bars indicate net buying pressure, while negative bars indicate net selling pressure.

  2. Volume Spikes: Large spikes in net volume can confirm the strength of a price move or signal a potential reversal (climax).

  3. Cumulative: Sometimes plotted cumulatively (like OBV) to show the aggregate flow over time.