Description

• Developed by Joseph Granville, it is simply the cumulative total of volume of up days minus volume of down days
• OBV simply shows the overall strength of a going trend as price with higher volume and falls with lower volume in an uptrend and vice versa in downtrend
• Days when price change is positive, volumes isare added to running OBV total and when change is negative, volumes is are deducted from total

Interpretation

• It helps to filter genuine buying in market and scan false rallies
• A divergence between price and OBV helps to predict price reversal as new highs or lows without non-confirmed support of volumes are non-confirmed
• Drawing trend line on price line and OBV line helps to confirm breakouts and continuations

Default Parameters Used/Inputs

• Price
• Close Rate
• Volume
• Number of shares traded on the bar

Returns/Output

On Balance Volume value of the stock

Formula

If close > close-1 then,
OBV = OBV-1 + volume
If close < close-1 then,
OBV = OBV-1 - volume