AS Chakravarthy NCFM Academy Hyderabad Stock Market Technical Analysis : On Balance Volume
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USE OF MOMENTUM INDICATOR OBV
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The On Balance Volume was developed by Joe Granville is a momentum indicator that relates volume to price.
On Balance Volume is a running total of volume. It shows if volume is flowing into or out of a security and when the security closes higher than the previous close, all of the day's volume is considered up-volume. When the security closes lower than the previous close all of the day's volume is considered down volume.
TO KNOW OUR Stock Market Training Institute in Hyderabad Please Visit AS Chakravarthy NCFM Academy Hyderabad.On Balance Volume is a simple calculation.
1. On an up day, the volume is added to the previous day's OBV
2. On a down day, the volume is subtracted from the previous day's OBV.
The OBV is in a rising trend when each new peak is higher than the previous peak and each new trough is higher than the previous trough. Similarly, the OBV is in a falling trend when each sequential peak is lower than the previous peak and each trough is lower than the previous trough. When the OBV is moving sideways and is not making continuous highs and lows, it is in a doubtful trend.
The On Balance Volume indicator can be used by investors as a tool to confirm price trends or warn of potential price reversals because of divergences between the price and the OBV indicator.
The method of inspecting On Balance Volume is carved for trading short-term cycles. According to Granville, investors must act quickly and decisively if they wish to profit from short-term OBV analysis.
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