Normalized Volume Indicator

The Normalized Volume Indicator (NVI) is a statistical measure used to evaluate a financial asset’s performance. One of the key features of an indicator is its ability to generate visual signals, such as a line or a histogram, when the value of the indicator rises above a certain average. Normalizing volume is a technique that adjusts the total volume of a financial asset to a percentage above or below a chosen time period. This helps traders and investors identify potential opportunities or trends in the market.

What is the Normalize Volume Indicator?

The Normalized Volume Indicator is a technical analysis tool that is used to identify trends in the market by comparing the current volume of a security to its historical average volume. If the current volume is higher than the historical average, it indicates increased buying pressure and a potential uptrend. If the current volume is lower than the historical average, it indicates decreased buying pressure and a potential downtrend.

  • Is a momentum indicator.
  • Is used to identify trends in the market.
  • Compares the current volume of a security to its historical average volume.

Normalized Volume Strategy

Buy Signal

  • The current volume is higher than the historical average volume.
  • The NVI is trending upwards.
  • The NVI is above its moving average.
Normalized Volume Indicator Buy Signal
Normalized Volume Indicator Buy Signal

Sell Signal

  • The current volume is lower than the historical average volume.
  • The NVI is trending downwards.
  • The NVI is below its moving average.
Normalized Volume Indicator Sell Signal
Normalized Volume Indicator Sell Signal

Normalized Volume Indicator Pros & Cons

The NVI indicator can help traders to develop their trading system in the market by providing a way to identify trends and make more informed trading decisions. It can also be used in conjunction with other technical indicators to confirm trends and improve the accuracy of trade signals.

Pros

  • Can be used to identify trends in the market
  • Can help traders to make more informed trading decisions
  • Can be used in conjunction with other technical indicators to confirm trends

Cons

  • Can produce false signals in choppy or ranging markets
  • May not work as well in low volume securities
  • May not provide much insight in the absence of volume data

Conclusion

The Normalized Volume Indicator is a technical analysis tool that is used to identify trends in the market by comparing the current volume of a security to its historical average volume. It is a momentum indicator that can be used to make more informed trading decisions and to confirm trends in the market. It has pros and cons, and can be a useful addition to a trader’s toolkit when used correctly.

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