Adds up the volume of up days and subtracts the volume of down days, revealing the true direction of money flow.
What it adds up
On-Balance Volume (OBV · On-Balance Volume) is a simple running counter. It adds the whole session's volume if the session closed up and subtracts it if it closed down. The absolute number means nothing. Its path is the message: is money building up going in or going out?
Its premise
Volume leads price. Quiet accumulation shows up as rising volume build-up before price jumps, and distribution shows up as a bleed in the counter while price still holds. So its most valuable reading is its divergence from price, not its agreement with it.
Reading the divergence
Price makes a new high while the volume counter fails to reach its previous high: the latest rise has no fuel, a classic warning. The reverse also holds. A new price low with a counter higher than its previous low hints that selling lost momentum and accumulation has started.
Hypothetical example
A stock drifts for two weeks between $45 and $47 without going anywhere, while its on-balance volume climbs steadily throughout. Hands are quietly accumulating inside the range, a pattern that has often come before genuine upside breaks.
Common mistake
Reading it in isolation, or on thin symbols: a single odd volume session (index rebalancing, expirations) bends the counter. It is a context indicator that supports or warns, not an entry trigger.
A sharper reading: compare it with price, not with itself
The indicator's absolute value means nothing (it depends on the starting point). The meaning is in the path of the line compared with the path of price. When they match, that confirms. When they diverge, that warns. The strongest case is price making a new high with the line not following: volume did not confirm the move. Its limit is that it adds or subtracts the whole volume with no weight for the size of the close, so a session that closed up one cent counts the same as one that jumped a hundred.
Where to see it on the platform
The quantitative analysis tools compute it among the volume indicators, and its lesson page in the Academy indicators explains its divergences with charts.
The technical chart shows it among the volume indicators, and the scanner flags divergences across symbols.
