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.