VolumeIntermediate
OBV
On-Balance Volume
On-Balance Volume measures cumulative buying and selling pressure based on whether prices close up or down. Developed by Joe Granville, it uses volume as a predictor of price movement.
How It Works
When price closes up, the day's volume is added to OBV. When price closes down, the volume is subtracted. The resulting cumulative line shows the trend in volume flow.
Formula
If Close > Prev Close: OBV = Prev OBV + Volume If Close < Prev Close: OBV = Prev OBV - Volume If Close = Prev Close: OBV = Prev OBV
Signal Interpretation
Rising OBV
Accumulation — buyers are more active than sellers. Confirms uptrend.
Falling OBV
Distribution — sellers are more active. Confirms downtrend.
OBV Divergence
Price makes new high but OBV doesn't — warns of potential reversal.
Use Cases
- ▸Confirming price trend with volume
- ▸Detecting institutional accumulation/distribution
- ▸Spotting divergence for early reversal warnings
Limitations
- ⚠OBV absolute values are not meaningful — only the trend matters
- ⚠Sensitive to large volume days
- ⚠One large volume day can distort the indicator
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BazaarPulse Tip
Look for OBV making new highs while price is consolidating — this often precedes a price breakout as institutions accumulate.