On Balance Volume (OBV): The OBV was introduced by Joe Granville his 1963 book, New Key to Stock Market Profits. It is a momentum indicator that measures positive and negative volume flow, and relates volume to price change. The indicator is based on the idea that volume precedes price. OBV provides a running total of volume and shows if this volume is flowing in or out of a security. OBV adds a period’s volume when the close is up and subtracts the period’s volume when the close is down. The OBV line is derived from the cumulative total of the volume additions and subtractions.
Chart courtesy of Prophet Financial Systems (www.prophet.net)