OBV

The On-Balance-Volume is a technical analysis indicator used to measure the positive and negative flow of volume in a security over time. It is a momentum indicator that measures positive and negative volume flow.

This indicator was developed by Joseph Granville. According to him, when volume increases sharply without a significant change in the stock’s price then the price will eventually jump up and when volume decreases sharply without a significant change in the stock’s price then the price will eventually jump down.

Calculation:
There are three rules implemented when calculating on-balance volume (OBV):
1. If today’s closing price is higher than yesterday’s closing price
Current OBV = Previous OBV + today’s volume
2. If today’s closing price is lower than yesterday’s closing price
Current OBV = Previous OBV – today’s volume
3. If today’s closing price equals yesterday’s closing price
Current OBV = Previous OBV