OBV vs volume: bars or a running total?
Volume bars tell you how busy each bar was. On-balance volume adds them into one running line. Same raw data, two very different ways to read it.
The short answer
Volume is the number of shares or contracts that traded during each bar. It's shown as bars under the chart.
On-balance volume (OBV) is a running total. On a bar that closes up, it adds that bar's volume. On a bar that closes down, it subtracts it. The result is one line that rises or falls over time.
Volume shows how busy each moment was. OBV tries to show which side has been doing more of the trading over a stretch.
Side by side
| Volume bars | OBV | |
|---|---|---|
| What it shows | How much traded each bar | A running total of up-bar minus down-bar volume |
| Shape | Separate bars | One line |
| The number itself | Means something (1.2 million shares) | Means little; the direction matters |
| Depends on start date | No | Yes, the level changes with where it starts |
| Best for | Spotting busy moments, checking breakouts | Seeing if volume backs a trend |
| Created by | Raw exchange data | Joe Granville, early 1960s |
| Settings | None | None |
How OBV is built, with numbers
Start at zero. Look at each close compared with the close before.
- Day 1 closes up on 1,000 shares. OBV = +1,000.
- Day 2 closes down on 600 shares. OBV = 1,000 − 600 = 400.
- Day 3 closes up on 800 shares. OBV = 400 + 800 = 1,200.
- Day 4 closes flat. OBV stays at 1,200.
Notice: a bar that closes up by one cent adds its whole volume. That's the main weakness. OBV doesn't know how big the move was.
Volume bars: strengths and limits
The good parts:
- Honest and raw. No math, just what traded.
- Great at key moments. A Breakout through a level on a big bar is more believable than one on a tiny bar. See breakout vs fakeout.
- Shows quiet times. Thin volume warns you that spreads and jumps may be worse.
The limits:
- Hard to read over time. Twenty bars of different heights don't tell an easy story.
- Busy times of day skew it. The first and last hour of the US stock session are usually busier, so a big bar at 9:31 am ET may be normal.
OBV: strengths and limits
The good parts:
- One line. Easier to compare with price over a long stretch.
- Shows agreement. Price rising with OBV rising suggests volume is backing the move.
- Shows disagreement. Price making a new high while OBV doesn't is a Divergence some traders watch.
The limits:
- Crude. A tiny up close counts the same as a huge one.
- Big single days distort it. One news day can shift the line for months.
- The number is meaningless. "OBV is 3.4 million" tells you nothing. Only its direction does.
Check what "volume" means in your market. Stocks and futures report real exchange volume. Spot forex has no central exchange, so charts often show tick volume, a count of price changes. It can still show busy and quiet times, but it isn't shares traded.
Which fits you?
- You want to check one move, like a breakout: raw volume bars. Look at the bar that broke the level.
- You want to see if a trend has support over weeks: OBV can help as a second opinion.
- You're new to volume: start with the bars. Learn what normal looks like on your market first. See how to read volume.
Neither one tells you where to enter. Mark the levels where price turned around, wait for a candle body to close past one, and use volume only to judge how believable that close is.
Common mistakes
- Reading OBV's number. Only the slope and the highs and lows matter.
- Trusting every divergence. OBV can disagree with price for a long time while the trend keeps going.
- Comparing volume across times of day. A lunch-hour bar and an opening bar aren't fair to compare.
- Treating tick volume like stock volume. In forex, it's a rough guide, not a count of trades.
- Skipping the stop. Strong volume doesn't decide your risk. The position size calculator does that from your stop.
Questions
What is the difference between OBV and volume?
Volume shows how much traded in each bar. OBV adds the volume of up-closing bars and subtracts the volume of down-closing bars, building one running line that shows whether volume has leaned up or down over time.
Is on-balance volume a good indicator?
It can be a useful second opinion on whether volume backs a trend. It's crude, though: every up close adds its full volume no matter how small the move. Use it next to clear levels on the chart, not alone.
Why is my OBV number negative?
OBV starts at zero wherever your chart's data begins. If more volume came on down days since then, the total is negative. The number itself doesn't matter, only which way the line is moving.
Does forex have real volume?
Spot forex has no single exchange, so there's no central volume figure. Charts usually show tick volume, a count of price changes. Currency futures, like the euro contract on CME, do report exchange volume.
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