On-Balance VolumeOBV
On-balance volume (OBV) adds a period's volume when the price closes up and subtracts it when it closes down, creating a running total of volume pressure.
On-Balance Volume turns daily volume into one running line that rises on up days and falls on down days. Traders watch its direction to judge whether volume is backing the price move.
- Category
- Indicators and Tools
- Reading time
- 3 min
- Also called
- OBV indicator, Granville OBV
- Updated
OBV in plain words
OBV gauges buying and selling pressure by keeping a running total of volume.1
Joe Granville created it and introduced it in his 1963 book on the stock market.1
The number itself doesn't matter — what matters is which way the line is heading.2
How OBV is calculated and read
Start a running total
Keep a cumulative total of volume.1
Classify each period
Add the period's volume when price closes higher than the previous close, and subtract it when price closes lower.1
Add or subtract
Add the day’s volume on up closes, subtract it on down closes, and leave OBV unchanged on flat closes.
Read the direction
If price and OBV both make higher peaks and higher dips, the uptrend is likely to continue.2
Look for bullish divergence
Watch for bullish divergence: OBV rising or making a higher low while price makes a lower low.1
Look for bearish divergence
Watch for bearish divergence: OBV falling or making a lower low while price makes a higher high.1
Worked examples
Example 1 — Running total
Rising OBVA hypothetical stock: day 1 up on 2M shares, day 2 down on 1M, day 3 up on 3M.
| OBV after day 1 | +2M |
| After day 2 | +1M |
| After day 3 | +4M |
Each period adds or subtracts volume depending on the close, leaving OBV at +4M.1
Example 2 — Bearish divergence
WarningA hypothetical stock makes a new high at 58, but OBV makes a lower high.
| Price high | 58 |
| OBV high | Lower |
That matches a bearish divergence, warning that volume is not supporting the rally.1
Example 3 — Confirmation
Trend confirmedA hypothetical index ETF and its OBV both make higher peaks and troughs for weeks.
| Price | Higher highs |
| OBV | Higher highs |
When both rise together the upward trend is likely to continue.2
OBV vs raw volume
| Aspect | OBV | Raw volume bars |
|---|---|---|
| Form | Cumulative line | Separate bars |
| Direction | Signed by close | Unsigned |
| Divergences | Easy to spot | Hard to spot |
| Level meaning | Unimportant | Shows activity |
Where OBV is used
Trend confirmation
Reversal warnings
Spot Divergence before a Reversal.
Breakout checks
Confirm a Breakout with rising OBV.
Pair with momentum
Combine with Relative Strength Index or MACD.
Advantages and disadvantages
Advantages
- Simple to calculate.
- Combines price and volume.
- Good for spotting divergences.
- Works on any timeframe.
Disadvantages
- One huge day can distort it.
- Ignores the size of price moves.
- Level has no meaning.
- Divergences can last long before mattering.
Going deeper
Read as far as you need. Each level builds on the one before it.
Cumulative by design
Beginner
Because OBV just adds volume on up days and subtracts it on down days, its starting value is arbitrary.2
Early volume tool
Intermediate
OBV was originally developed by Joe Granville in 1963, making it one of the first widely used volume indicators.1
Divergence logic
Advanced
Divergences can warn of a turn, but wait for price to confirm before acting.1
Common mistakes
Reading the OBV level
Watch direction only.
Ignoring volume spikes
One event day can skew it.
Acting on every divergence
Wait for price confirmation.
Using thin markets
Volume data can be unreliable.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- OBV is a running total of signed volume.
- Up closes add volume, down closes subtract.
- Direction matters, not level.
- Divergences can warn of reversals.
- Confirm with price action.
Frequently asked questions
Who created OBV?
Does the OBV number matter?
What if the close is unchanged?
Further learning
- Volume
The input OBV accumulates.
- Divergence
How OBV warnings work.
- Breakout
Confirming moves with volume.
- Volume-Weighted Average Price
Another volume-based tool.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- StockCharts ChartSchool. On Balance Volume (OBV) (opens in a new tab) Checked .
- Fidelity. On Balance Volume (OBV) (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): On-Balance Volume (OBV) (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.