On Balance Volume for the Uninitiated

On Balance Volume was first introduced in the early 1960s by Joe Granville and was one of the first indicators to measure positive and negative volume flow.1 The basic idea behind the indicator is that volume precedes price and this notion emerges in the use of the indicator in three important ways that are briefly illustrated in the following list. The construction of the indicator is straightforward:

  1. If the close of the current bar is greater than the close of the previous bar, the current bar's volume is added to the previous bar's OBV value.
  2. If the close of the current bar is less than the close of the previous bar, the current bar's volume is subtracted from the previous bar's OBV value.
  3. If there's ...

Get MIDAS Technical Analysis: A VWAP Approach to Trading and Investing in Today's Markets now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.