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On-Balance Volume

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Technical Indicators: On-Balance Volume
The Curious Investor  Dec 8  Comment 
On Balance Volume (OBV) is a very simple statistic that can often be very helpful when trying to determine if whether or not volume movements have been favorable or unfavorable. it was created by Joseph Granville in the 70s and has since become...




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On-balance volume is a method used in technical analysis to detect momentum, the calculation of which relates volume to price change. OBV provides a running total of volume and shows whether this volume is flowing in or out of a given security.

OBV attempts to detect when a financial instrument is being accumulated by a large number of buyers or sold by many sellers. Traders will use an upward sloping OBV to confirm an uptrend, while a downward sloping OBV is used to confirm a downtrend. Finding a downward sloping OBV while the price of an asset is trending upward can be used to suggest that the "smart" traders are starting to exit their positions and that a shift in trend may be approaching.

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