What is on-balance volume (OBV)?
In one line: On-balance volume (OBV) is a running total that adds a day's volume when price closes higher and subtracts it when price closes lower.
How it works
OBV was made popular by Joe Granville in the 1960s. The rules are simple:
- Close higher than yesterday: add today's Volume.
- Close lower: subtract today's volume.
- Close unchanged: OBV stays the same.
A simple example
Start OBV at 0.
| Day | Close | Volume | OBV |
|---|---|---|---|
| 1 | 50 | — | 0 |
| 2 | 51 (up) | 10,000 | 10,000 |
| 3 | 50.50 (down) | 4,000 | 6,000 |
| 4 | 52 (up) | 12,000 | 18,000 |
Price rose on the big-volume days and fell on a quiet day. OBV climbs, showing more shares changed hands on the up days.
The actual OBV number doesn't matter. What matters is the direction of the line.
Why it matters
Volume shows how much interest is behind a move. OBV turns that into a line you can compare with price.
- Price and OBV both rising: the up move has volume behind it.
- Price rising, OBV flat or falling: the move is happening on lighter volume. Some traders read that as a warning.
That second case is a type of Divergence. More on reading volume in how to read volume.
A common mistake
Treating an OBV divergence as a sell signal. Price can keep rising for a long time while OBV lags. A divergence is a reason to look harder at the chart, not a reason to act on its own.
Use OBV as a second opinion. The price chart, and where the candle bodies close, comes first.
Also note: in spot forex there's no central volume figure, so OBV there uses the broker's tick count. It's rougher than stock or futures volume.
Questions
Is OBV a leading indicator?
Some traders use it that way, watching for volume to shift before price does. It's still built from past data, so treat early signals with care.
What is a good OBV value?
There isn't one. The number depends on where you started counting. Only the direction and slope of the line matter.
Does OBV work on crypto?
You can add it to any chart with volume. Crypto volume differs between exchanges, so readings vary by data source.
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