On Balance Volume, abbreviated OBV, is a momentum indicator that combines price direction with volume to gauge whether volume supports the price move. It is constructed as a running total that rises with positive price closes and falls with negative closes, creating a single line that traders compare to price action.
For each trading day: if the closing price is higher than the previous close, OBV increases by the day’s volume; if it is lower, OBV decreases by the volume; if unchanged, OBV remains the same. The result is a cumulative line that can be plotted alongside price data.
Traders look for confirmations between OBV and price: a rising OBV during a price advance can suggest that volume is supporting the move, while a flat or falling OBV during an advance may indicate internal weakness. Divergences between OBV and price can signal potential changes in trend or momentum. OBV is commonly applied in trend-following contexts, breakout analysis, and as a supplementary check alongside other indicators.
OBV reflects by-the-book volume flow and does not predict direction with certainty. It can be affected by unusual volume events (earnings, dividends, or index rebalances) and may lag during rapid price moves. As with other indicators, it is most useful when considered with price action and other analytical tools rather than in isolation.
If a stock's price closes higher for several consecutive days and OBV also rises, the indicator suggests that volume is aligning with the price advance; if the price rises while OBV declines, there may be a divergence worth noting.
Volume · Price · Volume-Price Trend (VPT) · Chaikin Money Flow (CMF) · Accumulation/Distribution Line · Moving Average Convergence Divergence (MACD)