OBV (On-Balance Volume)
OBV is an indicator that accumulates volume by the direction of the close: a candle's volume is added when the close rises and subtracted when it falls. The question it asks is whether volume is building up on the same side as price. What matters is the slope of OBV, not its absolute value.
Which question does OBV answer?
Volume on its own shows how much was traded in each candle, but it carries no direction. OBV adds the direction of the close to volume. The volume of candles that close above the previous close counts as plus, the volume of those that close below counts as minus, and these are added up one after another.
The result is a single line. If it is rising, recent candles that closed higher have had more volume than those that closed lower. If it is falling, the opposite holds. OBV is a rough measure of whether a price move is backed by volume.
How it is calculated
- Choose a starting value. OBV usually starts from zero or from the first candle of the series. The starting point is arbitrary, which is why the direction of the line is read, not its level.
- Compare the close with the previous one. If the close is above the previous close: OBV = previous OBV + this candle's volume.
- Subtract volume on a lower close. If the close is below the previous close: OBV = previous OBV − this candle's volume. If the close is unchanged, OBV stays the same.
- Repeat for every candle. The result is a line in which volume is accumulated with a sign for direction. How far the candle moved does not matter; only its direction and volume go into the sum.
How it is read
- Slope, not value: an OBV of 1.2 million or minus 300,000 says nothing on its own. What is read is whether the line makes rising or falling highs and lows.
- Confirmation: if price makes higher highs and lows and OBV draws the same structure, the move is read as consistent with volume.
- Divergence: if price makes a new high while OBV stays below its previous high, the rise may be coming on less volume.
- Flat price, sloping OBV: if price moves back and forth in a range while OBV clearly trends one way, you can watch which direction of candles the volume is concentrating in.
These are common ways of reading it, not rules. When comparing OBV with price, look at the same timeframe and the same highs and lows.
What it shows, what it does not prove
What it shows
- Whether, over the chosen period, volume has built up mostly in candles closing higher or lower
- Whether the highs and lows of OBV move in the same direction as those of price
- A rough picture of how far a price move is consistent with volume
What it does not prove
- Who is buying and who is selling; every trade has a buyer and a seller
- That price will move in the direction of OBV, or when a divergence will play out
- How volume was spread within the candle; a candle closing only slightly higher still counts all its volume as plus
The MarketLevelMap view
How it relates to zones
OBV adds a second view of whether a move at a support or resistance zone is backed by volume. If price approaches a resistance zone while OBV also makes higher lows, the approach reads as consistent with volume. If OBV stays flat while price presses into the zone, the volume behind the move may be fading.
But the measure for reading the zone is still price. What decides a breakout or a rejection is the close relative to the far edge of the zone, read as a band. OBV adds context to that reading; it does not replace it.
Often confused with
For general information only. Not investment advice.Last updated: