MetaStock On Balance Volume Function

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On Balance volume is an alternative way of studying the volume of a security. It depicts volume as a running total and thereby tracks the amount of volume flowing into and out of a security.

CALCULATION

The On Balance Volume (OBV) value is calculated using the actual volume figures for each period. When the security closes higher than the previous period's close the volume for that period is added to the OBV total, and is considered up volume. If the security closes lower than the previous period's close then the volume for that period is subtracted from the OBV total, and is considered down volume. If the close is exactly the same, there is no change to the OBV total. A running total is kept by adding or subtracting the result from the current total.

Since it is a running total, the actual value of the OBV indicator is irrelevant except in relationship to itself. The direction of the OBV line is the thing to watch. This indicator will often confirm underlying strength or weakness of a price trend. For example, while the security may be rising, a top may be signalled by a declining OBV.

SYNTAX OBV(Data Array)

Data Array _ This specifies the data array being monitored to determine whether the security has increased or decreased in value.

EXAMPLE

The following formula obtains the value of OBV using the closing price data array:

OBV(C)

In the above example:

Data Array = C

APPLICATION

A more useful application of this example could be:

OBV(C)>Mov(OBV(C),15,S)

This formula checks to see whether or not the OBV is in a short term up trend. This is achieved by ensuring the OBV is presently above the 15 period moving average of the OBV.

Looking at Figure 3.28, we can see the OBV indicator at the base of the chart.

 
 

Figure 3.28 _ OBV Indicator  

EXERCISES

Construct formulas for the following:

1. The OBV increasing over the last 3 periods:

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