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On Balance Volume

Trading Term

The concept behind the OBV indicator is: volume precedes price. OBV is a simple indicator that adds a period’s volume when the close is up and subtracts the period’s volume when the close is down. A cumulative total of the volume additions and subtractions forms the OBV line. If today’s close is greater than yesterday’s close then: OBV(i) = OBV(i-1)+VOLUME(i)

If today’s close is less than yesterday’s close then:

OBV(i) = OBV(i-1)-VOLUME(i)

If today’s close is equal to yesterday’s close then:

OBV(i) = OBV(i-1)

Where:

OBV(i) — is the indicator value of the current period.

OBV(i-1) — is the indicator value of the previous period.

VOLUME(i) — is the volume of the current bar.

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