volume Indicator
What Is On-Balance Volume (OBV)?
OBV measures buying and selling pressure as a cumulative indicator, adding volume on up days and subtracting on down days.
Quick Answer
OBV measures buying and selling pressure as a cumulative indicator, adding volume on up days and subtracting on down days.
What Does OBV Measure?
On-Balance Volume (OBV) was developed by Joe Granville in 1963. It creates a running total of volume, adding the full day's volume when price closes higher and subtracting when price closes lower. OBV often moves before price, making it a leading indicator for potential breakouts or breakdowns.
Formula:
If close > previous close: OBV = Previous OBV + Volume; If close < previous close: OBV = Previous OBV - VolumeHow to Read OBV
- 1Rising OBV confirms upward price trend
- 2Falling OBV confirms downward price trend
- 3OBV divergence from price signals potential reversal
- 4OBV breakout can precede price breakout
How to Use OBV in Trading
✓Confirm price trends with volume
✓Identify accumulation and distribution
✓Spot divergences for reversal signals
✓Predict potential breakouts
Common Mistakes to Avoid
✕Ignoring OBV divergences
✕Using OBV in isolation
✕Not considering overall volume trends
✕Expecting exact timing from OBV signals
Use OBV in VaultCharts
VaultCharts includes On-Balance Volume with customizable settings. Combine it with our automated pattern detection and trade signals for better analysis.