The forex industry is made up of countless definitions and it's easy to forget a few along the way. But because no forex education can be complete without a glossary of forex terms, we've compiled one which aims at explaining key definitions in the simplest way possible. This way, you'll never be lost or confused again!
It is a Volume Indicator developed by Joseph Granville. Each day’s volume is assigned a plus or a minus sign, depending on whether the current day’s closing price is higher or lower than the previous day’s closing price. The result is added to a running cumulative total.
If Closing Price current > Closing Price previous then add Volume
If Closing Price current < Closing Price previous then subtract Volume
If Closing Price current = Closing Price previous then no change
The On Balance Volume should be in the same direction as the prevailing trend. Divergence is a signal that the prevailing trend is weakening and an impending reversal may be imminent.
Category: Technical Indicators