On Balance Volume

On Balance Volume is a cumulative indicator that measures trading volume flow by adding the volume on up-days and subtracting the volume on down-days.

By relating price to volume, it’s possible to observe the divergences that may occur, which could signal bullish or bearish trends. The OBV was conceived to predict when significant fluctuations in security prices and the market would occur.

The positive volume pressure which causes the OBV line to rise should lead to price increases. The negative volume pressure which causes the OBV line to fall will likely lead to the price decreasing.

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