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On Balance Volume (OBV)

Developed by Joseph Granville in the 1960s, this volume indicator shows whether the volume is flowing in or out of a financial instrument. OBV is drawn as a curving line to gauge the health of the price trend. A divergence between the indicator and the price alerts for a weakening of the trend and an impending correction or reversal. The On Balance Volume is calculated as a cumulative total where the volume is added to it when the financial instrument under study closes above the previous session’s close. Conversely, when the closing price is below the previous session’s close, the corresponding volume is subtracted.

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