On-Balance Volume (OBV)
On-Balance Volume (OBV) is a running total that adds volume on up closes and subtracts it on down closes. It is used to see whether volume is supporting the current price direction, or quietly diverging from it.
Dynamic Chart Demo
* This chart uses synthetic data to demonstrate the indicator's behavior in typical market conditions.
Core Usage
Advantages
- Volume can shift before the price move becomes obvious
- Simple calculation and easy to visualize
- Effective at confirming breakouts
Limitations
- Can be thrown off by large institutional block trades
- Doesn't account for the magnitude of price change
- Needs to be used with other analysis tools
Calculation Logic
Understanding the mathematical logic behind indicators helps you interpret signals more accurately and avoid misuse in unsuitable market environments.
Common Trading Strategies
OBV Trend Confirmation
Buy when both Price and OBV are making higher highs.
OBV Divergence
Look for bearish reversal when price makes a new high but OBV fails to do so.
Best For
"Volume analysis and spotting early trend reversals."
Note: Technical indicators are mathematical calculations based on historical price and volume. They should be used as part of a comprehensive trading system, not as a standalone entry signal.