The On-Balance Volume (OBV) is a technical trading momentum indicator that uses volume flow to predict changes in stock price. The primary purpose of OBV is to measure the cumulative buying and selling pressure by adding the volume on “up” days and subtracting volume on “down” days. It helps in identifying whether the volume is flowing into or out of a security.

Syntax:

OBV(price)

Example:

i1 = OBV(close)
i2 = OBV(close[10])
test = i1 - i2
RETURN test

This example demonstrates how to calculate the OBV for the current closing price and the closing price 10 periods ago. The difference between these two OBV values (i1 and i2) is then calculated and returned as ‘test’. This can help in analyzing the momentum and possibly predicting future price movements based on volume changes.

• The price parameter in the OBV function can be any array of prices, typically the closing prices of a stock.
• OBV can be a useful indicator for confirming trends. An increasing OBV reflects positive volume pressure that can lead to higher prices. Conversely, decreasing OBV indicates negative volume pressure which can lead to lower prices.

Understanding OBV and its implications can be crucial for traders who rely on technical analysis to make informed trading decisions. It is especially useful in identifying price trends and potential reversals based on changes in volume activity.