On-Balance Volume (OBV)
A running tally that reveals whether volume is quietly flowing in or out.
On-Balance Volume (OBV)A running volume tally that confirms price moves. turns volumeThe number of shares or contracts traded in a period. into a single running line. The rule is simple: on an up day, add that day’s volumeThe number of shares or contracts traded in a period. to the tally; on a down day, subtract it. The result is a cumulative measure of whether volume is, on balance, flowing into or out of a stock.
OBV’s power is that it can reveal buying or selling pressure before it shows up in price. Because it accumulates volumeThe number of shares or contracts traded in a period. by direction, OBV often leads price: if OBV is quietly rising while price drifts sideways, volumeThe number of shares or contracts traded in a period. is flowing in — someone is accumulating, and price frequently follows upward. The opposite (OBV falling under a flat price) warns of quiet distribution. You’re watching the flow beneath the level — and flow tends to move first.
- Confirmation — OBV rising with price confirms a healthy uptrendThe prevailing direction of price: up, down or sideways. (volumeThe number of shares or contracts traded in a period. supports the move).
- OBV divergenceWhen price and a momentum indicator disagree — an early warning. — price makes a new high but OBV doesn’t (or vice versa): the volumeThe number of shares or contracts traded in a period. flow disagrees with price, a warning the move lacks backing.
- Leading hint — OBV trendingThe prevailing direction of price: up, down or sideways. while price is flat suggests accumulation/distribution that price may soon reflect.
ExampleA stock chops sideways for weeks, but its OBV line steadily climbs — volumeThe number of shares or contracts traded in a period. is flowing in even though price hasn’t moved. Soon after, price breaks out upward. The OBV had revealed the quiet accumulation before the breakoutWhen price decisively pushes through a support or resistance level. became obvious on price.
Key takeawayOBV is a running tally — add volumeThe number of shares or contracts traded in a period. on up days, subtract on down days — that shows whether volumeThe number of shares or contracts traded in a period. is flowing in or out. Rising OBV under flat price hints at accumulation (price may follow); OBV/price divergenceWhen price and a momentum indicator disagree — an early warning. warns a move lacks volume backing.
FAQs
Is the absolute OBV number meaningful?
No — OBV’s raw value is arbitrary (it depends on where the count started). What matters is its *direction and slope*, and how it lines up with price: is it trending up or down, and does it confirm or diverge from price? Read the shape, not the number.