On-balance volume

On-balance volume

On-balance volume (OBV) is a technical analysis indicator intended to relate price and volume in the stock market. OBV is based on a cumulative total volume.[1]

Contents

The formula


OBV = OBV_{prev} + \left\{ \begin{matrix}
volume  & \mathrm{if}\ close > close_{prev} \\
0       & \mathrm{if}\ close = close_{prev} \\
-volume & \mathrm{if}\ close < close_{prev}
\end{matrix} \right.

Application

Total volume for each day is assigned a positive or negative value depending on prices being higher or lower that day. A higher close results in the volume for that day to get a positive value, while a lower close results in negative value.[2] So, when prices are going up, OBV should be going up too, and when prices make a new rally high, then OBV should too. If OBV fails to go past its previous rally high, then this is a negative divergence, suggesting a weak move.[3]

The technique, originally called "cumulative volume" by Woods and Vignolia, was later named in 1946, "on-balance volume" by Joseph Granville who popularized the technique in his 1963 book Granville's New Key to Stock Market Profits[1]. The index can be applied to stocks individually based upon their daily up or down close, or to the market as a whole, using breadth of market data, i.e. the advance/decline ratio.[1]

OBV is generally used to confirm price moves.[4] The idea is that volume is higher on days where the price move is in the dominant direction, for example in a strong uptrend more volume on up days than down days.[5]

Similar indicators

Other Price × Volume indicators:

See also

  • Dimensional analysis — explains why volume and price are multiplied (not divided) in such indicators

References

  1. ^ a b c Joseph E. Granville, Granville's New Strategy of Daily Stock Market Timing for Maximum Profit, Prentice-Hall, Inc., 1976. ISBN 0-13-363432-9
  2. ^ On Balance Volume ( OBV ). 22 September 2007.
  3. ^ OBV Behaviorial Limitations and Formulas at Financial-edu.com.
  4. ^ What Does On-Balance Volume Mean
  5. ^ StockCharts.com article on On Balance Volume

Wikimedia Foundation. 2010.

Игры ⚽ Поможем написать реферат

Look at other dictionaries:

  • On-Balance Volume - OBV — A method used in technical analysis to detect momentum, the calculation of which relates volume to price change. OBV provides a running total of volume and shows whether this volume is flowing in or out of a given security. This indicator was… …   Investment dictionary

  • On Balance Volume —    A technical analysis indicator that is based on the trend in the volume, or the number of shares traded, in a particular share compared with the trend in its price. The assumption is that changes in volume precede changes in prices. For… …   Financial and business terms

  • Balance hydrostatique — d un laboratoire de physique (1920) La balance hydrostatique est une balance destinée à mettre en évidence la poussée d Archimède. Elle sert aussi à déterminer la densité d objet non solubles dans l eau et plus denses que l eau ou la densité de… …   Wikipédia en Français

  • Balance (Van Halen album) — Balance Studio album by Van Halen Released January 24, 1995 …   Wikipedia

  • Balance radiativo terrestre — Saltar a navegación, búsqueda La Tierra, para mantenerse térmicamente estable a lo largo del tiempo debe ser capaz de evacuar, en término medio, toda la energía recibida en forma de radiación. Existen unos mecanismos reguladores que efectúan… …   Wikipedia Español

  • Balance board — A balance board is a device used for recreation, athletic training, brain development, therapy, musical training and other kinds of personal development. It is a lever, similar to a see saw, that the user usually stands on, usually with the left… …   Wikipedia

  • Balance of power in international relations — In international relations, a balance of power exists when there is parity or stability between competing forces. As a term in international law for a just equilibrium between the members of the family of nations, it expresses the doctrine… …   Wikipedia

  • Balance — n. & v. n. 1 an apparatus for weighing, esp. one with a central pivot, beam, and two scales. 2 a a counteracting weight or force. b (in full balance wheel) the regulating device in a clock etc. 3 a an even distribution of weight or amount. b… …   Useful english dictionary

  • balance — n. & v. n. 1 an apparatus for weighing, esp. one with a central pivot, beam, and two scales. 2 a a counteracting weight or force. b (in full balance wheel) the regulating device in a clock etc. 3 a an even distribution of weight or amount. b… …   Useful english dictionary

  • Balance of Power (Red Dwarf episode) — Infobox Red Dwarf episode name = Balance of Power image caption = Lister tries to pass the chef exam so he can outrank Rimmer number = 3 airdate = February 29, 1988 writers = Rob Grant Doug Naylor director = Ed Bye guests = Clare Grogan as… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”