Using spreadsheet to produce OBV indicators (On Balance Volume)

Stock Exchange and Market Analysis

Technical Analysis (21)

OBV (On Balance Volume) is derived by Granvile (Joseph E. Granville) in his book written by 1963 to get a new secret stock market profits," the elaboration out of a sentiment indicator , used to be popular representatives of stock market trading volume in accordance with the number of price change direction , and plotted trend provides investors a measure of growth and decline of long and short at the time . when a Bobby wave of OBV is amplified, it expresses Popularity convergence and is characterized by the bull market . Conversely, when the energy influx OBV shrinking , it shows collapsing popularity and is the sign of the short market . Since the amount of leading indicators are divalent , to observe changes in volume generally allows early to judge whether the stock has a turning point . In order to grasp the OBV indicator , the characteristics it presents are as follows :

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Figure.1 Energy Tide OBV (On Balance Volume)

1. The larger the differences of the stock investors , the reaction to the greater volume . Vice versa reduced . Thus daily and used to determine the sentiment long and short strength .
2. Gravity Principle : volume equivalent energy market , the stock to rise like the object to be boosted up requires energy , and therefore the need to enlarge the volume Going process , by a rising section is essential . However, as Newton fell prediction Apple's free fall is as easy as it is , and there is no need to match the volume . Therefore, the price increase is rising , and the price drop is an inevitable result .
3. Inertia : The so-called dynamic is constant, the static is constant , the stocks with large stock price fluctuations will be accompanied by large fluctuations in volume , and the unpopular cold stocks usually have a relatively small fluctuation in their price .
The calculation method of the OBV trend line is simple and intuitive . As long as the stock volume of the stock is accumulated day by day , the cumulative method depends on the stock price rise and fall on the day . When the stock price is closed , the definition adds or subtracts to zero . Today's OBV value is equal to yesterday's OBV value. When the closing price is positive , the OBV value of yesterday is added to the daily trading volume ; when the closing price is negative , the daily trading volume is reduced by the OBV value of yesterday . The OBV trend chart often exhibits N- shaped fluctuations ( Figure 1 ). , when OBV former value increased over the time N when the font vertices , then a left arrow mark up , and vice versa at a stage before falling below each time N when the low-shaped , is written, a down arrow mark .When the N -line pattern appears continuously in the rising process , you should start to pay attention to the reversal signal . When there is a large N- shaped pattern , it indicates that the rising market is nearing completion , and the stock price may be reversed at any time . The same method can also be applied in the falling stage.
4. If the stock price K- line chart and OBV trend deviate from each other , it means that the long- selling force is about to be exchanged , and the stock market is about to change . The stock operation should be extra careful .
5. If the OBV trend line is in the horizontal direction for a period of time , it means that the market chips are still in the stage of brewing . Once it starts to rise , it is possible to start the next big market at any time . If the change in the volume of transactions is also simultaneously amplified , the long market can be established .
Next, let us according to OBV import mathematical formulas Excel spreadsheet :
OBV _t : a first t-1 day OBV value plus the first t index value date V _t
  OBV _t = OBV _{t -1} + V _t
  V _t : volume indicator value on the tth day
  When C _t = C _t - ₁ , then V _t =0
  When C _t > C _t - ₁ , then V _t = the volume of the tth day , which is positive .
  When C _t < C _t - ₁ , then V _t = - ( the volume of the t- day ) is negative .
   C _t : the closing price of the day of t
The principles of application of OBV indicators can generally be classified into the following points for reference :
1. When the OBV indicator deviates from the stock price trend , it is a signal of market reversal :

• The stock price rose but the OBV indicator fell , indicating that the market's price-tracking power is weak , and the rising momentum is insufficient . The stock price may reverse downward at any time .
• The stock price fell but the OBV indicator rose , indicating that the market's dips will strengthen and the popularity will return . The market may stop falling and rise , which can be regarded as an opportunity to buy signals .

2. When the OBV indicator synchronous and stock price trends , and is slowly time , is the market continued the trend of long and short signals :
  i. Share price and OBV indicators are slowly rising , indicate a steady upward market , bull market unchanged , shareholders may continue to hold , empty-handed may still opportunistic approach .
  ii. The shares fell OBV indicator also slow down , indicate the market gradually grind , short trend change , shareholders should sell stand-leave , empty-handed those who patiently wait and see appropriate places .
3. When the stock market is in a horizontal arrangement , the trend of the OBV indicator will become an important reference indicator for long-term changes :
  i. If the OBV indicator starts to rise upwards , it means that some people in the market are taking over the floating amount of chips , and the bottom has begun to emerge . The empty hand can wait for an opportunity to enter the market .
  ii. If the OBV indicator starts to weaken downwards , it means that some people in the market are gradually taking off their shares , lowering their chips and looming their heads . Shareholders should wait for an opportunity to play in order to avoid jail .
4. N- type of OBV indicator ( Figure 1 ) short-term operation :
  i. When the OBV indicator is in a rising N- shaped trend , the N- shaped high point of each band usually represents a large resistance area where the market continues to break upwards , and the short-term back-up rate is large . If you can cross the N- shaped high point in one fell swoop , it represents the market. Breaking through the pressure zone , the bull market will continue .
  ii. When OBV when a rapid rise in the trend indicators , represents most of the buying has been admitted , to support the stock price strength weakened , the market may pullback at any time , once the OBV indicator began to reverse downward , expressed Going fatigue , obvious to sell Signal number .
  iii. When the OBV indicator from the N reverse the downward font highs , the time and the decline accelerated , indicates that the disc has the potential to turn mostly empty . Start N -shaped downtrend . In each band N process fonts usually represent low prices decline In the large support area , the short-term rebound probability is large . But when the downtrend breaks through the previous wave of N- shaped lows , it usually means that the market has lost short-term support , and the market is still dominated by the empty side .
Although the above is the general rule of entering and exiting stocks , but because the calculation principle of OBV index is too simple , it is more suitable for short-term operation analysis , and the stock property is different . It is better to observe the stock price trend chart of the subject matter for at least one year. The technical indicators are appropriately corrected . In order to facilitate the readers to use the OBV indicators , the author still uses the model of Juyang (template) to continue to produce analytical samples in Excel format for readers' reference :

template21.xlsx

In addition to this sample " historical stock price " provides spreadsheet OBV the external reference index , the second spreadsheet provides the candlestick graph , volume and OBV trend chart for the reader . If any mistakes found, please don't hesitate to correct me . Thank you !
In addition , the author made EXCEL spreadsheet for various indicators (moving average , RSI, BIAS, stochastic KD line, William indicator , MACD, CDP and Bollinger band) for stock analysis , and further produced candlestick charts and other technical indicators on the same chart , interested readers can refer to Ref.1.
Reference (Ref):
1. Investment Financial Notes - Stock Technical Analysis