Net Volume
Definition
Net volume is a technical indicator calculated by subtracting a security’s downtick volume from its uptick volume over a specified period. It shows whether more shares traded at upticks or downticks during that period and is typically plotted as bars beneath the price chart.
How it’s calculated
Net volume = Uptick volume − Downtick volume (for the chosen period)
Each bar represents the net result for that period (e.g., a minute, hour, or day).
Interpreting net volume
- Positive net volume indicates more trading occurred on upticks, suggesting bullish buying pressure.
- Negative net volume indicates more trading occurred on downticks, suggesting bearish selling pressure.
- Magnitude reflects the imbalance in buying vs. selling activity for that period.
Example
If a lightly traded stock has five downward trades of 200 shares each (5 × 200 = 1,000 shares on downticks) and one upward trade of 10,000 shares (10,000 shares on upticks), net volume = 10,000 − 1,000 = +9,000. Even if the price closed lower, the large positive net volume suggests underlying bullish momentum.
How traders use it
- Confirm breakouts or breakdowns by checking whether price moves are supported by positive or negative net volume.
- Assess short-term market sentiment and intraperiod buying or selling pressure.
- Combine with other technical tools (trendlines, moving averages, indicators) to improve trade signals.
Comparison with other indicators
- Money Flow Index (MFI): Uses both price and volume to estimate buying/selling pressure; net volume uses only volume.
- On-Balance Volume (OBV): Cumulatively adds volume on up days and subtracts on down days to show a running total; net volume examines discrete single-period imbalances.
- Relative Strength Index (RSI): Measures the magnitude of recent price gains vs. losses (momentum) without directly using volume.
Limitations and appropriate uses
- Net volume focuses solely on volume imbalance for a single period and doesn’t capture cumulative trends over time.
- It can be noisy for very thinly traded securities unless interpreted in context.
- Best used as a quick read of intraperiod buying or selling pressure and as a complement to more comprehensive momentum or volume-based indicators.
Key takeaways
- Net volume highlights whether recent trading activity favored upticks or downticks.
- Positive readings suggest underlying buying pressure; negative readings suggest selling pressure.
- Use net volume alongside other technical analysis tools to confirm moves and assess momentum.