On Balance Volume
Liens connexes:
Acceleration / Deceleration Oscillator | Moving Average Convergence / Divergence On Balance Volume |
OBV - On Balance Volume
On Balance Volume indicator was invented by Joseph Granville who linked the volume to the price change. When the security closes higher than the previous close, all of the day's volume is considered up-volume. When the security closes lower than the previous close, all of the day's volume is considered down-volume.OBV changes precede price changes. The theory is that smart money can be seen flowing into the security by a rising OBV. When the public then moves into the security, both the security and the On Balance Volume will surge ahead.
If the security's price movement precedes OBV movement, a "non-confirmation" occurred. This may happen when the security rises without, or before, the OBV as well as when the security falls without, or before, the On Balance Volume Technical Indicator. This usually defines bull market tops or bear market bottoms.
The OBV is in a rising trend when each new top is higher than the previous one and each new bottom is higher than the previous one. The dropping trend is characterized by the decrease of tops and bottoms. The tendency is undefined when indicator moves sideways.
There are two ways in which the On Balance Volume trend can be broken. The second way the OBV trend can be broken is if the trend changes to a doubtful trend and remains doubtful for more than three periods. If the trend is broken and remains doubtful for only two periods before changing back to a rising trend, the On Balance Volume is considered to have always been in a rising trend.
When the OBV changes to a rising or falling trend, a "breakout" has occurred, which usually precedes price changes. In case of upside breakout it is recommended to buy and to sell when the breakout is downside. Positions should be held until the trend changes.
Calculation:
If the current close is greater than the previous one:OBV (i) = OBV (i - 1) + VOLUME (i).
If the current close is lower than the previous one:
OBV (i) = OBV (i - 1) - VOLUME (i)
If the current close is equal to the previous one:
OBV (i) = OBV (i - 1)
Where:
OBV (i) - On Balance Volume indicator value in the current period;
OBV (i - 1) - On Balance Volume indicator value in the previous period;
VOLUME (i) - volume of the current bar.
Similar information about indicators you can find in information system of trade platform MetaTrader 4 (Help-> Help Topics [F1] -> Ananlitics -> Technical Indicators).
