On Balance Volume is a momentum indicator that relates volume to price changes. It is calculated by adding the day’s volume to the cumulative total when the security’s price closes up, and subtracting the day’s volume when the price closes down. The scale is not of any value; only the slope (i.e., the direction) of the line is of value.
The theory is that the trend of this indicator precedes price changes. This indicator was pioneered by that famous (?) market maven Joseph Granville.
Article Credits:
Contributed-By: Y. D. Charlap, Scott A. Thompson