On-Balance Volume (OBV)
Overview
On-Balance Volume is a cumulative volume indicator that adds volume on up days and subtracts it on down days, creating a running total that reveals whether volume is flowing into or out of an asset. Developed by Joe Granville, OBV often leads price — a rising OBV during a consolidation suggests accumulation, while a falling OBV during a hold signals distribution. The direction of OBV matters more than its absolute value.
Key Concepts
Cumulative calculation: volume added on up closes, subtracted on down closes. OBV trend reveals underlying buying or selling pressure. Divergences between OBV and price signal potential reversals. OBV breakouts from trendlines can precede price breakouts. Rising OBV during consolidation indicates accumulation; falling OBV indicates distribution.
Entry Signals
Enter long when OBV breaks above its own trendline resistance while price is still consolidating. Buy when OBV makes a higher high while price makes an equal or lower high (bullish divergence). Look for OBV to confirm a price breakout — a breakout on rising OBV is more reliable. Enter when OBV shows steady accumulation during a price pullback in an uptrend.
Exit Signals
Exit longs when OBV diverges bearishly — making lower highs while price makes higher highs. Close positions when OBV breaks below its own support trendline. Take profits if OBV flattens after a strong advance, suggesting buying pressure is fading. Watch for OBV to confirm exits — if price drops but OBV holds steady, the pullback may be temporary.
Best Timeframes
1H, 4H, Daily
Pro Tips
OBV is most powerful as a leading indicator — watch for OBV to break out of a range before price does, as this often signals an impending move. Do not fixate on the absolute OBV value; focus entirely on its direction and divergences from price. Pair OBV with price action analysis for confirmation rather than using it in isolation.
More Topics in This Category
Klinger Volume Oscillator
The Klinger Volume Oscillator (KVO) measures the long-term trend of money flow by comparing volume to price movement direction. It calculates a volume force based on the relationship between the high-low range, close, and volume, then applies two exponential moving averages to create an oscillator. The KVO is particularly useful for identifying divergences between volume flow and price, signalling potential reversals before they occur.
Elder's Force Index
Elder's Force Index, developed by Dr Alexander Elder, measures the force behind price movements by combining three essential elements: direction of price change, magnitude of that change, and volume. The raw force index is smoothed with an exponential moving average to create a practical oscillator that identifies trend strength, potential reversals, and the best pullback entries during an established trend.
Money Flow Index (MFI)
The Money Flow Index is a volume-weighted RSI that measures buying and selling pressure by incorporating both price and volume data. It oscillates between 0 and 100, with readings above 80 considered overbought and below 20 considered oversold. Because it includes volume, MFI often provides earlier reversal signals than standard RSI, making it particularly effective for identifying exhaustion moves.
Anchored VWAP
Anchored VWAP (Volume-Weighted Average Price) allows traders to calculate the average price weighted by volume from any specific point in time, such as a major high, low, earnings event, or market open. Unlike the standard session VWAP that resets daily, anchored VWAP persists from the chosen anchor point, revealing the average cost basis of all participants who traded since that event and creating dynamic support and resistance levels.