On-balance volume

On-balance volume ( OBV ) is an indicator in technical analysis, the price and volume during market trading in relationship sets. OBV is used to calculate the cumulative total exchange trading, a fungible good or economic index.

History

This indicator was presented by Woods and Vignolia 1946 in a course and originally referred to as cumulative volume. Joseph Granville made ​​the technology under the name of on-balance volume with his 1963 published book, Granville 's New Key to Stock Market Profits known ..

The formula

Calculation and interpretation

The trading volume each day is shown depending on the development of the closing price compared to the closing price of the previous day as a positive or negative value. This value is added to the previous day's OBV, so that a lower (higher ) the closing price leads to a decreasing ( increasing ) in the previous day's OBV comparison. It follows that the OBV rises when prices of the considered the asset or index can rise and fall when they fall.

The calculation shows that maxima and minima in the trend in prices of OBV and price are achieved at the same time. If OBV and Preisextrema this will move parallel interpreted as a confirmation of current price trends. This is a common application of the indicator.

OBV reaches a maximum only lower than the previous one, while the price achieved an equally high or higher maximum than before, is spoken by a negative deviation. This is considered a bearish signal because falling prices more volume has been reached as when prices are rising. Conversely, achieving higher minima of the OBV is valid for further price falls as a signal of an incipient bull market.

Resistors can be used the same way in the OBV chart, such as chart as leading indicators. These breakthroughs are as signals that the trend is reversed in the OBV understood and can generate further signals for the price of the asset under consideration or index.

Weaken

The on-balance volume a delayed response to large changes in volume. For example, trading volume spikes cause the OBV then passes as a cumulative value of an adaptation period during which the validity is limited. Was the trading volume in the past, high and decreases in the sequence, so the development of the OBV is subdued and it is difficult to detect changes in direction of the indicator. Increases the volume of trade suddenly, then the OBV changed significantly even with little change prices. Today, there are more complex trading volume - price indicators that take into account volatility and do not have this weakness accordingly.

Other indicators

Other trading volume - price indicators:

• Price and volume trend
• Accumulation / distribution index