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On-Balance Volume

On-Balance Volume (OBV) is an indicator designed by Joseph GranviUe and described in his book, New Strategy of Daily Stock Market Timing.Granville used OBV as a leading indicator of the stock market, but other analysts have applied it to the futures markets.

OBV is a running total of volume. It rises or falls each day, depending on whether prices close higher or lower than on the previous day. When a stock closes higher, it shows that bulls won the day's battle; its volume on that day is added to OBV. When a stock closes lower, it shows that bears won the day, and that day's volume is subtracted from OBV. If prices close unchanged, OBV stays unchanged.

On-Balance Volume often rises or falls before prices - it acts as a leading indicator. As Granville put it, "Volume is the steam that makes the choo- choo go."