What is OBV?
On Balance Volume keeps a running total of volume in its own pane. When a bar closes higher than the bar before, its whole volume is added; when it closes lower, its whole volume is subtracted. The idea is that volume tends to lead price, so a total that keeps climbing while price is flat suggests buying is building underneath.
OBV shows whether volume has come in mostly on up closes or down closes. Its absolute value carries little meaning, it does not weigh how far a bar moved, and it does not predict price on its own.
How to use OBV
- Trend of the line. OBV rising with price means volume is coming in on up closes and backing the move. OBV falling with price means the same for a decline.
- Divergence. Price making a new high while OBV does not suggests the advance is happening on lighter volume. Price falling while OBV holds up suggests selling is being absorbed. Divergence is the main way OBV is used.
- Breakouts on the line. OBV breaking above its own recent range before price does is read as volume leading price. It is a heads-up, not a confirmation.
- Ignore the number. The total depends on where the chart's history starts, so read the shape and direction of the line rather than its value.
These are ways to read the line, not entry signals on their own.
Settings
This indicator has no adjustable inputs. It uses each bar's close and volume.
Calculation
Each bar's volume is signed by the direction of its close compared with the previous close, and the signed volumes are added into a running total:
direction = +1 if close > previous close
-1 if close < previous close
0 if close = previous close
OBV = previous OBV + direction * volumeA bar that closes exactly where the previous one did adds nothing at all, rather than adding its volume in either direction. The size of the move does not matter: a bar that closes one tick higher adds its full volume, the same as a bar that closes far higher.
The first loaded bar has no previous close, so it has no value and contributes nothing. The total starts from zero on the second bar.
Limitations
- The level depends on loaded history. The total starts at the first bar the chart has loaded, so loading more history moves the whole line. Two charts of the same market can show different OBV values.
- One bar's direction decides all of its volume. A bar with heavy two-way trading that closes marginally higher adds its whole volume as buying.
- Single spikes distort it. One unusually heavy bar can shift the line for the rest of the chart, since nothing ever drops out of a running total.
- Volume quality varies between exchanges. OBV is only as good as the volume the exchange reports for that market.
- It is not a strategy. On its own it carries no risk management, sizing or exit.
Frequently asked questions
On Balance Volume is a running total of volume. Each bar's volume is added when the bar closes above the previous close and subtracted when it closes below it. Bars that close unchanged add nothing.
Compare the direction of OBV with the direction of price. When both rise or both fall, volume is backing the move. When they disagree, for example price at a new high and OBV not, the move is happening on weaker volume. The value of OBV itself is not meaningful.
No. The indicator declares no inputs. It always uses each bar's close and volume, and has no length because it is a running total of every loaded bar.
Closed bars are not revised by new bars. The current bar's contribution moves while that candle is live, and can switch from added to subtracted if the close crosses the previous close. Because the line is a running total from the first loaded bar, scrolling back to load older history moves the whole line up or down without changing its shape.
OBV starts from zero at the first loaded bar, so whether it sits above or below zero only says whether more volume came on up or down closes since that bar. A negative value is not bearish in itself; read the direction of the line.
Use the Add to chart button at the top of this page. It opens BTC/USDT on Binance in the Altrady Charts terminal with the built-in On Balance Volume already applied. On any other market, open the indicator picker on the chart and choose On Balance Volume from the Volume group.