On Balance Volume (OBV) is a popular technical indicator for measuring buying and selling pressure in a security. It was developed by Joseph Granville in the 1960s and is based on the premise that volume precedes price movement.
OBV is calculated by adding the volume of a security on days when the price increases and subtracting the volume on days when the price decreases. The resulting value is then added to a running total, creating a cumulative indicator that reflects the overall buying and selling pressure of the security.
When the price is increasing and the OBV is also increasing, it suggests that buying pressure is increasing. Conversely, when the price is decreasing and the OBV is also decreasing, it suggests that selling pressure is increasing.
OBV can be used to confirm or refute trends identified by other technical indicators. For example, if a security is in an uptrend and the OBV is also rising, it suggests that the uptrend is strong and likely to continue. On the other hand, if a security is in an uptrend but the OBV is declining, it suggests that the uptrend may be losing momentum and could reverse soon.
Formula for calculating OBV:
OBV = Previous OBV + Current Volume x (1 if Close > Previous Close, -1 if Close < Previous Close, 0 if Close = Previous Close)
On Balance Volume OBV
Technical Indicator
On Balance Volume (OBV) is a popular technical indicator for measuring buying and selling pressure in a security. It was developed by Joseph Granville in the 1960s and is based on the premise that volume precedes price movement.
OBV is calculated by adding the volume of a security on days when the price increases and subtracting the volume on days when the price decreases. The resulting value is then added to a running total, creating a cumulative indicator that reflects the overall buying and selling pressure of the security.
When the price is increasing and the OBV is also increasing, it suggests that buying pressure is increasing. Conversely, when the price is decreasing and the OBV is also decreasing, it suggests that selling pressure is increasing.
OBV can be used to confirm or refute trends identified by other technical indicators. For example, if a security is in an uptrend and the OBV is also rising, it suggests that the uptrend is strong and likely to continue. On the other hand, if a security is in an uptrend but the OBV is declining, it suggests that the uptrend may be losing momentum and could reverse soon.
Formula for calculating OBV:
OBV = Previous OBV + Current Volume x (1 if Close > Previous Close, -1 if Close < Previous Close, 0 if Close = Previous Close)
