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Finance Dictionary and Glossary of Investment Terms
On Balance Volume
A popular momentum indicator developed by Joseph Granville that keeps a running total of volume and tracks whether volume is flowing into or out of a security. 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.On Balance Volume (OBV) is calculated by assigning a positive or negative value to the day''s volume depending on whether prices closed higher or lower that day. OBV, like Money Flow, does not care how much a stock goes up or down, just whether it''s up or down for the day. A running total is kept by adding or subtracting the result from the current total.When using OBV to trade, the direction of the OBV line is the thing to watch, not the actual volume level. This indicator will often confirm underlying strength or weakness of a price trend and will often signal a top by declining while the stock is still rising, indicating big money is leaving the stock. Conversely, a rising OBV in the face of a declining price trend or an OBV that refuses to confirm a new stock low could indicate smart money is moving in and a bottom may be at hand.