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Definition

This was the first volume-based technical method developed by Joseph Granville. The method begins with an arbitrary total like 100 000 to which the positive volumes are added and the negative volumes are subtracted. The volume for the day is considered positive if the share price goes up and vice versa. The purpose of the OBV is to detect insider trading which normally takes the form of massive increases in volume with very small changes in price. Critics of OBV point out that the weakness of the technique is that the movement in the chart is the same for large and small price movements. A good example of this is Labat (LAB) which saw massive increases in volume with rising prices from 11th June 2020 - subsequently the price rose sharply. Consider the chart: 
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<figure class="figure"><a class="lightbox" href="/onlinecourse/images/Joseph_Granville.png" data-plugin-options="{'type':'image'}"> <img class="figure-img img-fluid" src="/onlinecourse/images/Joseph_Granville.png" /></a>
<figcaption class="figure-caption">Labat (LAB): OBV - 14 May 2020 - 26 June 2020. Chart by ShareFriend Pro.</figcaption>
</figure>
</center>
The top chart is a standard candlestick chart of the share's price, the middle chart is an OBV chart and the bottom chart is a volume histogram with a 30-day simple moving average running through the middle of it. Note that volumes began to rise sharply from 8th June 2020 accompanied by small increments in the share's price. This caused the OBV chart to spike upwards forming an acute angle which is a classic OBV buy signal. The signal was given on Friday 19th June 2020 and we drew clients' attention to it with an <a href="/index.php/on-balance-volume">article</a>. On that day the share closed at 46c. A week later on Friday 26th June 2020 it closed at 75c - a gain of 63% in a week.

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