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Trading and Investment Terms

On Balance Volume

On Balance Volume (OBV) was developed by Joseph Granville, a well-known technician, and market letter writer. 

It is a cumulative indicator that essentially measures positive and negative volume.

The formula generates a smooth indicator line that carves out highs, lows, and trendlines similar to price bars. 

To measure a security's OBV, you need to understand the relationship of closing prices between two successful trading days. When the second day's price closes above the prior day's close,

OBV=Previous OBV+Current trading volume​

 If prices close lower on the second day,
OBV=Previous OBV−Current trading volume