OBV

On Ballance Volume

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Technical Analysis

Technical Analysis, Studies, Indicators:

On Balance Volume (OBV)

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Patent #: US 7,831,984 B2
MarketVolume®'s technology of displaying and presenting intraday volume and volume based technical indicators is protected by copyright law and patent. Unauthorized distribution or reproduction of proprietary technologies will be prosecuted to the maximum extent possible under the law.

Description: volume based technical indicators for market timing, technical analysis and trend predictions, chart example.

On Balance Volume (OBV) is one of the first volume indicators in the technical analysis. Introduced by Joe Granville in 1963 it become one of the first most used technical indicators to analyze positive and negative volume flow.

As with all volume indicators the principle "Volume Moves Markets" is in the core of the OBV indicators. By understanding that there is no price movement without volume and that there is no volume without price change, the technical analysis already in the middle of the 20th century realized the importance of the volume analysis.

The OBV calculations are simple. The On Balance Volume is cumulative total of the negative and positive volume, where the negative volume is volume during the price decline and positive volume is volume during the price advance.

When the current bar close is higher than the previous bar close (price rises), then the OBV formula is:

OBV = previous bar OBV + current bar Volume

When the current bar close is below the previous bar close (price declines), then the OBV is calculated as:

OBV = previous bar OBV - current bar Volume

In a situation when the current bar close is the same as previous bar close then the OBV stays unchanged:

OBV = Yesterday's OBV

The On Balance Volume could be used as confirmation indicator as well as a tool to predict coming trend reversal.

If the OBV line moves up along with the price MA (Moving Average) technical analysis tells that the OBV confirms the up-trend. At the same time the OBV decline during the price drop would confirm a down-trend. The divergence of the SBV movement and price trend could be used to anticipate possible changes in the market trend. The declining OBV during the price advance may indicate possible beginning of a new down-trend, while advancing OBV during the price decline could indicate a possibility of begging a new up-trend.

The same as with other volume based indicators the OBV provides best result when it is applied to analyze indexes (NASDAQ 100, S&P 500, DJI, NYSE and other)

Chart 1: NASDAQ 100 index - On Balance Volume (OBV).

Nasdaq 100 OBV On Balance Volume

V. K.

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Technical studies classified by the types of technical analysis

MV Studies - list of technical indicators (studies) developed MarketVolume® team. We are the first who introduced this indicators to the world and at the current moment we are the only company that provides these indicators and we consider ourselves these indicator developers.

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