On Balance Volume (OBV) is the indicator that combines price with the volume on a stock market based on the total cumulative volume. Volume is added on the day in which prices rose (the closing price is higher than the previous closing price), and decreased on the day in which prices fell (the closing price is lower than the previous closing price).
OBV was first discovered in 1940 by Woods and Vignolia, they call it 'Cumulative Volume'. Later by Joseph Granville who popularized the technique in 1963, in his book entitled 'Granville's New Key to Stock Market Profits' named as 'On Balance Volume'.
Granville explained that when the volume is increased or declined drastically without a significant price change, or in other words, prices move sideways, then at some point the price will go up drastically shrink or fall dramatically as well. This is due to professional traders and institutional investors began to make purchases from the average are still selling, or otherwise sell to the average investor to make a purchase.
OBV formula:
OBV was first discovered in 1940 by Woods and Vignolia, they call it 'Cumulative Volume'. Later by Joseph Granville who popularized the technique in 1963, in his book entitled 'Granville's New Key to Stock Market Profits' named as 'On Balance Volume'.
Granville explained that when the volume is increased or declined drastically without a significant price change, or in other words, prices move sideways, then at some point the price will go up drastically shrink or fall dramatically as well. This is due to professional traders and institutional investors began to make purchases from the average are still selling, or otherwise sell to the average investor to make a purchase.
OBV formula:
OBV = previous OBV + volume, if the closing price > the previous closing price
OBV = previous OBV + 0, if the closing price = the previous closing price
OBV = previous OBV - volume, if the closing price < the previous closing price
OBV = previous OBV + 0, if the closing price = the previous closing price
OBV = previous OBV - volume, if the closing price < the previous closing price
OBV indicator functions like volume parameter which is to confirm the movement of stock prices. OBV view of the line generated by a formula and used to measure impulse buying or selling pressure. This indicator is often used because it is sometimes very difficult to transform and read the trunks of the volume bars are precision pad in a conventional manner.
OBV line serves as a trend line. If price movements Form a higher high and higher lows as well as appropriate with the OBV line. Rising OBV line indicates the volume of transactions is greater when stock prices have strengthened in the day than the day before. This is very important to support a trend. So when the OBV line opposite to the trend (for example, prices are rising but declining OBV line), then it could provide the initial signal will likely trend reversal. The deviation between the directions of movement of stocks with OBV line is called the divergence.
OBV line serves as a trend line. If price movements Form a higher high and higher lows as well as appropriate with the OBV line. Rising OBV line indicates the volume of transactions is greater when stock prices have strengthened in the day than the day before. This is very important to support a trend. So when the OBV line opposite to the trend (for example, prices are rising but declining OBV line), then it could provide the initial signal will likely trend reversal. The deviation between the directions of movement of stocks with OBV line is called the divergence.
0 comments:
Post a Comment