Guide · Volume & money flow
Does Negative Volume Index work?
Across 374 stocks, Negative Volume Index cut the worst fall on 78%, beat buying and holding on risk-adjusted return on 17% and on raw return on 15%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
A price index that moves only on days when volume shrinks, on the theory that quiet days show what informed investors are doing. Hold the stock while that index is above its one-year average.
- The index starts at 1,000. On a day when volume is lower than the day before, it moves by that day's percentage price change. On other days it stays put.
- In when the index closes above its 255-day exponential average (Fosback's one-year average).
- Out when it closes below that average.
Volume & money flow plays bet that volume shows conviction. The family guide
How to use it
- Expect to be wrong more often than right: only 34% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Real estate (37% beat holding on risk-adjusted return) and worst on Big tech (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Negative Volume Index did best against holding in the 2008 crash (+14% median gap) and worst in the 2020–21 rally (−10%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Negative Volume Index | +14% | −7% | +0% | −10% | +0% | −4% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Real estate | 37% | -0.09 |
| Indexes & ETFs | 29% | -0.01 |
| Healthcare | 28% | -0.09 |
| Financials | 27% | -0.08 |
| Industrials & rentals | 22% | -0.22 |
| Software & devices | 21% | -0.12 |
| Energy & power | 20% | -0.14 |
| Media & telecom | 20% | -0.10 |
| Sectors | 17% | -0.06 |
| Consumer & retail | 12% | -0.15 |
| Industrials & materials | 10% | -0.13 |
| Metals & mining | 6% | -0.24 |
| Semiconductors | 4% | -0.13 |
| Big tech | 0% | -0.17 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Negative Volume Index holds 242 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.