|  JAN 2004

Daytrading With On-Balance Volume by D.W. Davies

Daytrading With On-Balance Volume by D.W. Davies Where is the smart money going? Here’s how you can find out. On-balance volume (OBV) is a momentum indicator that relates price change to volume. It has proven itself over and over again as an important market trading tool for the intermediateterm investor. It is particularly useful for spotting accumulation or distribution during periods of price consolidation. Most intermediate-term investors include a study of OBV in their research of a potential stock buy or sell. However, it can also be a great aid in the rough-and-tumble world of daytrading the emini stock index futures. First, a little background on OBV. The indicator was developed by the technical analyst and market guru of yesteryear, Joe Granville. He presented a detailed account of this valuable market tool in his New Strategy Of Daily Stock Market Timing For Maximum Profits. It is from this book we get the trading maxim “Volume precedes price.” CALCULATION On-balance volume is calculated by adding the volume to a cumulative total when price closes up, and subtracting the volume when price closes down. If there is no price change, there is no change made to the OBV cumulative total.

by D.W. Davies