What Is OBV (On-Balance Volume)?
On-Balance Volume, introduced by Joseph Granville in 1963, is a running total of volume — added when price closes higher than the previous bar, subtracted when it closes lower. The result is a line that moves with smart-money accumulation/distribution.
The signal isn't the absolute OBV value but its trend: rising OBV alongside rising price confirms strength; rising OBV with flat or falling price suggests hidden accumulation that may precede a breakout. Divergence between OBV and price is the classic warning of trend exhaustion.
OBV works best on stocks with consistent, transparent volume reporting. On crypto exchanges where volume is partially wash-traded, OBV is less reliable. Combine it with a price-based indicator for confirmation — OBV alone has too many false positives.
Related terms
- Volume
- Divergence (Bullish / Bearish) — When price makes a new high or low but a momentum indicator does not — signal of weakening trend.
- VWAP (Volume Weighted Average Price) — Intraday average price weighted by volume — institutional benchmark for execution quality.
- Accumulation