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OBV (On-Balance Volume)

In short

Cumulative volume indicator — volume precedes price movement

OBV adds volume on up days and subtracts on down days. The idea: if prices are rising but volume is weak, the move isn't convincing. When OBV rises before price, big money may be accumulating.

OBV runs a cumulative total — adds volume on up-days, subtracts on down-days. Rising OBV with flat price suggests accumulation (bullish divergence). Falling OBV with flat price suggests distribution (bearish divergence).

Formula

OBV = OBV(prev) + Volume (if Close > Prev Close) or - Volume (if Close < Prev Close)

Related concepts

  • Volume Profile — Volume profile shows where most trading happened at different price levels. Heavy trading at a price means traders consider it fair value. Low trading zones are areas where price moves fast.
  • VWAP — VWAP is the true average price traders paid throughout the day, weighted by how many shares traded at each price. Institutions use it as a benchmark — buying below VWAP is considered a good fill.
  • RSI (Relative Strength Index) — RSI scores a stock from 0–100. Above 70 means it's been rising so fast it might be due for a pullback (overbought). Below 30 means it's fallen a lot and could bounce (oversold).
  • MACD — MACD compares two moving averages to show momentum. When the fast line crosses above the slow line, it's a buy signal. Cross below = sell signal. Like two runners — when the faster one pulls ahead, momentum is shifting.