VolumeIntermediate[ MP.IND.OBV ]
OBV
On Balance Volume
On Balance Volume, developed by Joe Granville in 1963 and presented in his book 'Granville's New Key to Stock Market Profits', is one of the oldest and still effective volume indicators.
Category
Volume
Difficulty
Intermediate
Markets
Stocks, Indices, Crypto
Timeframe
Daily, 4H
Combinations
2 tools
Signals
5 setups
LIVE CHARTOBV ACTIVE
[ HOW TO READ THE CHART ]
Green Zone: Rising OBV with rising price → Uptrend confirmed by volume
Red Zone: Falling OBV with rising price → Bearish divergence: distribution in progress
Main Line: Rising OBV with flat price → Accumulation: bullish breakout imminent
Confluence: Combine OBV with RSI for maximum probability
[ WHAT TO WATCH ON THE CHART ]
Observe how OBV behaves relative to key price points. Note moments when the indicator reaches extreme levels and how price reacts. Look for divergence patterns between the indicator and price movement.[ FORMULA ]
If Close > Close prev: OBV = OBV prev + Volume If Close < Close prev: OBV = OBV prev - Volume If Close = Close prev: OBV unchanged OBV is a cumulative indicator with no fixed scale
What signals does OBV generate?
Rising OBV with rising price → Uptrend confirmed by volume
Falling OBV with rising price → Bearish divergence: distribution in progress
Rising OBV with flat price → Accumulation: bullish breakout imminent
OBV breaks its historical high → Strong confirmation of price breakout
OBV at new lows while price consolidates → Persistent selling pressure
What is OBV and how does it work?
On Balance Volume, developed by Joe Granville in 1963 and presented in his book 'Granville's New Key to Stock Market Profits', is one of the oldest and still effective volume indicators. It's based on a simple principle: volume precedes price. When price falls but volume is heavily long (OBV rises), strong hands are accumulating even while retail sells. When price rises but OBV is flat or falling, distribution is occurring: big players are selling while retail buys the euphoria.
How do you use OBV in trading?
OBV is mainly used for DIVERGENCES and CONFIRMATIONS:
1) TREND CONFIRMATION: If price rises AND OBV rises → trend confirmed by volume: potentially sustainable. If price falls AND OBV falls → downtrend confirmed: hold shorts.
2) DIVERGENCE — the most powerful signal:
- Bullish divergence: price makes new lows but OBV makes higher lows → strong hands are accumulating, bullish breakout probable
- Bearish divergence: price makes new highs but OBV makes lower highs → distribution in progress, bearish reversal probable
3) SILENT ACCUMULATION: When price is flat (sideways) but OBV rises constantly → institutional accumulation in progress, bullish breakout imminent. This is the most powerful OBV signal: it identifies breakouts BEFORE they happen.
4) OBV AS BREAKOUT CONFIRMATION: When price breaks a resistance, OBV must also break its previous high. If OBV doesn't confirm the price breakout → high-risk false breakout.
What are the strengths of OBV?
Anticipates price movements through volume
Simple to calculate and interpret
Excellent for US stocks where volume is transparent
Identifies accumulation/distribution silently
What are the limitations of OBV?
Not normalized: scale not comparable across assets
Less effective on Forex (estimated volume)
Does not consider the magnitude of moves (only direction)
[ RELATED INDICATORS ]
[ RELATED CONTENT ]
Glossary:Breakout
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