On Balance Volume(OBV)Study | Technical Analysis
This technical analysis indicator is used to determine buying and selling pressure,which adds volume on up days and deducts on down days.Supply and demand is one of the prime important factor for determining the price of a stock.In simple words this indicator is used to measure the positive(+) and negative(-) flow of volume in a security, relative to its price over time.
When positive volume exceeds negative volume the buying pressure is evident and the OBV line will rise,while if negative volume is on the rise the OBV line will fall and it indicates the selling pressure.
There are various software’s out there which allows you to use it.But if you want to know how it is calculated following is the equation
If the closing price is above the prior close price then:
Current OBV = Yesterday’s OBV + Current VolumeIf the closing price is below the prior close price then:
Current OBV = Yesterday’s OBV - Current VolumeIf the closing prices equals yesterday’s closing price then:
Current OBV = Yesterday’s OBV (no change)