On Balance Volume (OBV) was developed by Joseph Granville, a well-known technician, and market letter writer.
It is a cumulative indicator that essentially measures positive and negative volume.
The formula generates a smooth indicator line that carves out highs, lows, and trendlines similar to price bars.
To measure a security's OBV, you need to understand the relationship of closing prices between two successful trading days. When the second day's price closes above the prior day's close,
OBV=Previous OBV+Current trading volume
If prices close lower on the second day,
OBV=Previous OBV−Current trading volume