On Balance Volume in Excel
MarketXLS.com offers On Balance Volume excel based utilities to enhance your personal spreadsheets. Utilizing the security identifier and a date rage, we can generate OBV trend lines allowing us to enhance our charting capabilities by provide a powerful analytical tool. Historically the On Balance Volume indicator has been a valuable and reliable tool for many traders.
What is On Balance Volume:
On-Balance Volume (OBV) Excel analytics utilizes volume and price to help predict future price movement. The on balance volume indicator is one of the few indicators that truly precedes the movement of price. Other Indicators, MACD and RSI to name a few popular tools are lagging indicators. The benefit of the OBV is that it is a leading indicator and can help identify trends.
On Balance Volume Formula:
OBV totals of the volume both additions and subtractions and forms and OBV value. Cumulating the values we can draw a trend line that can then be compared with the price chart of the underlying stock. Allowing us to identify divergences or confirmations of trends.
The method for OBV is as follows:
If closing price Today(n) is greater than (>) the closing price of yesterday (n-1), then OBV of Today(n) = OBV of day Yesterday(n-1) + Todays(n) trading volume
If closing price of day Today(n) is less(<) then close price of Yesterday(n-1), then OBV of Today(n) = OBV of day Yesterday(n-1) – Todays trading volume
If closing price of Today(n) equals(=) the closing price of Yesterday(n-1), then OBV of Today(n) = OBV of Yesterday(n-1) – or no change
On Balance Volume Excel Formula
Excel coupled with VBA scripting can enhance your charting capability. Utilizing the tools we can trend the On Balance Volume indicator. To calculate the OBV you will need the securities historical trading volume and closing prices. These can be source from Yahoo Finance or another open source forum with historical data.
Note: The OBV of day 1 is the trading volume of day 1 – Or first day of reporting period.
Continued until last day of reporting date range
On Balance Volume Benefits
OBV helps predict trends and trend reversals. When large volume occurs with minimal price change, we should plan for a bullish trend. On the contrary, a significant decrease in volume with minimal price change are a bearish signal. Bullish divergences form when the OBV trends higher creating higher lows even as prices move lower. Bearish divergences form when the OBV indicator trends lower and forms lower lows, while prices trend higher and forge higher highs. As with any indicator, the OBV should not be the only too utilize. Paired with other tools like price action can have large benefits to your trading strategy.
Educated in Finance, Business and Statistics, Ankur is passionate about finance, investing, trading and programming.