On Balance Volume (OBV) indicator

On Balance Volume (OBV) is a technical indicator that uses volume to predict changes in price. It was developed by Joe Granville in the 1960s. The OBV indicator measures buying and selling pressure as a cumulative indicator that adds or subtracts volume based on whether the price of an asset closes higher or lower than the previous period. The formula for calculating the OBV is as follows:

OBV = Previous OBV + Current Volume * Sign of today's price change

Where:

• Previous OBV: the OBV value of the previous period
• Current Volume: the trading volume of the current period
• Sign of today's price change: +1 if the price of the asset increased compared to the previous period, -1 if the price of the asset decreased, and 0 if the price remained unchanged.

The OBV indicator is plotted as a line, with the x-axis representing time and the y-axis representing the OBV values. If the OBV line is trending upwards, it suggests that buying pressure is increasing and that the price of the asset is likely to continue rising. Conversely, if the OBV line is trending downwards, it suggests that selling pressure is increasing and that the price of the asset is likely to continue falling.