On-Balance-Volume (OBV) Stock Trading Strategy Using Python
OBV capitalizes on this idea by keeping a running tally of volume when price moves up or down. On up days, volume (e.g., share count) is added to the indicator. On down days, volume is subtracted from the indicator. OBV can be used in any kind of system – trend following/momentum or price reversal.
- On-balance volume (OBV) is a simple accumulation-distribution tool that tallies up and down volume, creating a smooth indicator line to predict when major market moves might occur based on changes in relative trading volume.
- OBV works best when testing around major highs and lows to measure for possible breakouts and breakdowns.
- Investors can use OBV to provide many key predictions, such as a bullish divergence predicting the price will break resistance or a bearish divergence predicting a rally will stall or reverse.