Indicator reference › OBV
OBV — On-Balance Volume
Volume What it measures
OBV accumulates volume on up-days and subtracts it on down-days, creating a running total. The absolute value is meaningless — only the trend and divergences matter. The premise: if OBV is rising while price is flat, institutions are accumulating quietly, suggesting price will follow. If OBV falls while price rises, institutions are distributing.
How readings are interpreted
When OBV makes new highs alongside price: strong trend confirmation. When price makes new highs but OBV doesn't: bearish divergence — the rally lacks volume conviction. When price is flat but OBV rises: accumulation phase, anticipate breakout to the upside. OBV is best used for divergence analysis and trend confirmation.
Conventional levels
- OBV rising with price: healthy uptrend
- OBV falling while price rises: bearish divergence — potential top
- OBV rising while price falls: bullish divergence — potential bottom
- OBV breaking to new highs: confirms price breakout is valid
- OBV trend line break: often precedes price trend line break by several days
Where it works, and where it does not
Most effective for liquid assets with reliable volume data. Works particularly well for identifying institutional accumulation and distribution in large-cap stocks. Less useful for assets with inconsistent or manipulated volume (some crypto exchanges). Best on daily charts.
Commonly read alongside
- Price breakouts: OBV confirming a price breakout validates it significantly
- Moving Averages: Apply a 20 EMA to OBV to smooth and spot OBV trend changes earlier
- MACD: OBV trend + MACD trend in agreement = strong directional conviction
Known limitations
- OBV doesn't account for the SIZE of price moves — a tiny up-close on huge volume vs large up-close on small volume receive equal treatment
- OBV can mislead in assets with large overnight gaps
- The absolute OBV level is meaningless — only the slope and divergences matter
In practice
- Apply a 20-period EMA to OBV: when OBV crosses above its EMA, it's a bullish signal
- OBV divergence with price over 2+ weeks on daily chart = high-quality setup
- Pre-breakout pattern: OBV makes a new high 3-5 days before price does
- Track cumulative OBV from a key level (e.g. post-earnings low) to see net buying since that point
Plot it yourself. Add this indicator to a chart, change every
parameter and watch the line move, then backtest how the rule would have
behaved on historical data — free on the S&P 500 ETF, no card.
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indicator measures and how its readings are conventionally interpreted. Nothing
here is a recommendation to buy or sell anything, and no indicator predicts
future prices. GU Analyser is an analytical tool — no money is ever traded here.