ON BALANCE VOLUME, OBV
On Balance Volume Technical Indicator (OBV) is a transformation technical indicator that relates volume to cost change. The indicator, that Joseph Granville came up with, is flattering simple. When a confidence closes aloft than a prior close, all of a day’s volume is deliberate up-volume. When a confidence closes reduce than a prior close, all of a day’s volume is deliberate down-volume.|
The simple assumption, per On Balance Volume analysis, is that OBV changes convey cost changes. The speculation is that intelligent income can be seen issuing in to a confidence by a taking flight OBV. When a open afterwards moves in to a security, both a confidence as well as a On Balance Volume will swell ahead.
If a security’s cost transformation precedes OBV movement, a “non-confirmation” has occurred. Non-confirmations can start during longhorn marketplace tops (when a confidence rises without, or before, a OBV) or during bear marketplace bottoms (when a confidence falls without, or before, a On Balance Volume Technical Indicator).
The OBV is in a taking flight direction when any latest rise is aloft than a prior rise as well as any latest tray is aloft than a prior trough. Likewise, a On Balance Volume is in a descending direction when any unbroken rise is reduce than a prior rise as well as any unbroken tray is reduce than a prior trough. When a OBV is relocating laterally as well as is not creation unbroken highs as well as lows, it is in a puzzled trend.
Once a direction is established, it stays in force until it is broken. There have been dual ways in that a On Balance Volume direction can be broken. The initial occurs when a direction changes from a taking flight direction to a descending trend, or from a descending direction to a taking flight trend.
The second approach a OBV direction can be damaged is if a direction changes to a puzzled direction as well as stays puzzled for some-more than 3 days. Thus, if a confidence changes from a taking flight direction to a puzzled direction as well as stays puzzled for usually dual days prior to becoming different behind to a taking flight trend, a On Balance Volume is deliberate to have regularly been in a taking flight trend.
When a OBV changes to a taking flight or descending trend, a “breakout” has occurred. Since OBV breakouts routinely convey cost breakouts, investors should buy prolonged upon On Balance Volume upside breakouts. Likewise, investors should sell reduced when a OBV creates a downside breakout. Positions should be hold until a direction changes.
OBV(i) = OBV(i-1)+VOLUME(i)
If today’s tighten is reduction than yesterday’s tighten then:
OBV(i) = OBV(i-1)-VOLUME(i)
If today’s tighten is next to to yesterday’s tighten then:
OBV(i) = OBV(i-1)
Technical Indicator Description
Full outline of OBV is accessible in a
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