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  • On-Balance Volume Indicator

On-Balance Volume Indicator

  • Posted by Abhilash Bandari
  • Date November 25, 2020
  • On-Balance Volume indicator is a technical indicator used for analysing the stock market.
  • It is a momentum indicator which uses the volume flow to predict changes in the price. 
  • The indicator is based on the logic that if there is a significant increase in the volume level without much change in price, then the price will eventually rise or fall.

Formula for On-Balance Volume Indicator:

OBV = OBV(prev) + volume, (if close > close(prev))

OBV = OBV(prev) , (if close = close(prev))

OBV = OBV(prev) – volume, (if close < close(prev))

Where, 

  • OBV(prev) = previous On-Balance Volume,
  •  close(prev) = previous close price,
  • Volume = latest trading volume amount

This is the 1 day chart of Infosys Ltd (NSE) around Dec, 2019 to Aug, 2020

  • The main advantage of OBV is that it can be used to track the institutional investors.
  • When the institutional investors buy the shares sold by the retail investors, there is a rise in the volume without much rise in the price level.
  • Eventually, the rise in volume drives the price upward. Again at that point, large investors start buying whereas small investors begin to sell.
  • Since the OBV is a cumulative value, a significant change in the value indicates a significant change in the volume traded, which takes place only when the institutional traders step into the market. Thus OBV is used to track the large investors.

 

  • The main disadvantage of an OBV indicator is that it is a leading indicator.
  • So, not much information can be extracted about what actually happened, which can lead to false results.
  • Traders should use add few lagging indicators (moving averages) to balance the effect.
  • Share:
author avatar
Abhilash Bandari

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November 25, 2020

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Company Summary

Bajaj Electricals Limited is engaged in engineering and projects; power distribution, illumination and consumer durables businesses.

It has a range of domestic and kitchen appliances comprising water heaters, room heaters, coolers, irons, mixers, induction cookers, toasters, kettles, microwave, rice cookers, gas stoves, non-electrical kitchen aids and pressure cookers.

It offers ceiling, table, pedestal, wall, fresh air and industrial fans, and lighting solutions, such as light sources, light emitting diode-based lighting products, domestic luminaires, torches and lanterns.

Key Highlights of Company Business

Segments and Products

The Company's business segments consist of

  1. Lighting;
  2. Consumer Durables;
  3. Engineering & Projects,

The Lighting segment includes lamps, tubes and luminaries.

The Consumer Durables segment includes appliances and fans.

The Engineering & Projects segment includes transmission line towers, telecommunications towers, highmast, poles and special projects.

The Others segment includes diecasting and wind energy.

Financial Performance

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