On balance volume, the technical indicator is used to confirm the price changes. The calculation is given below-
- On the regular days, when the close balance is greater than then open balance, then its volume is added to the running OBV total.
- On the other hand, when the close balance is much lesser than the open balance, then its volume is subtracted from the running OBV total.
With the increase in the volume, the price rise will be bullish. So, it can be said that increasing OBV is bullish. When the volume increases and the cost decreases, it is called as bearish. A decline of the OBV is considered as bearish. As a confirmation tool, if the OBV indicator and the cost are rising together, then it is called as bullish. When the OBV and the price are moving downward, then it is considered bearish.
When the price moves lower or higher on the low volume, then On Balance Volume indicator will be quite hard to move. The cost movement was not yet confirmed by the volume, and so it is looked by the traders as a questionable movie wherein they are unlikely to join in.