Definition
On-Balance Volume is a momentum indicator that uses volume flow to predict stock price changes. It adds volume on up days and subtracts on down days, creating a running total. Divergences between OBV and price can signal potential reversals. Rising OBV confirms uptrends; falling OBV confirms downtrends.
Formula
OBV = Previous OBV + (Volume if close > previous close) or - (Volume if close < previous close)
Example
Stock price rises but OBV falls, suggesting the rally lacks volume support and may reverse.
FAQ
What is OBV (On-Balance Volume)?
A cumulative volume indicator that relates volume to price changes.
How do you calculate OBV (On-Balance Volume)?
A common formula for OBV (On-Balance Volume) is: OBV = Previous OBV + (Volume if close > previous close) or - (Volume if close < previous close)
Why is OBV (On-Balance Volume) important?
OBV (On-Balance Volume) helps investors evaluate technical analysis and make more informed decisions.