On-balance volume
A running total that adds the period's volume when price closes up and subtracts it when price closes down, showing whether volume is flowing into or out of a security ahead of price confirming the move.
What the numbers mean
Nothing to set — this one is read straight off price or volume, with no lookback period or multiplier behind it.
How it is used
Read for direction and divergence rather than level: OBV making new highs alongside price confirms the move, while OBV flattening or falling as price rises suggests the advance is running on less participation than it appears. Some traders add a 20-period average to define OBV's own trend.
- OBV making new highs with price → the advance is confirmed
- OBV flat or falling while price rises → fewer participants behind the move
- OBV breaking out before price → the divergence traders watch for
- A 20-period average of OBV → gives the line its own trend to cross
How it relates to everything else
OBV and the A/D line answer the same question with different assumptions: OBV credits the whole bar's volume to whichever side won the close, while A/D splits it according to where the close sat within the range. When the two disagree, it usually means closes are strong but intraday ranges are not — or the reverse.
- OBV vs A/D → all-or-nothing versus proportional attribution
- OBV divergence + RSI divergence → two independent warnings agreeing
- Absolute value is meaningless; only slope and divergence matter
What to watch for
It credits the entire bar's volume to whichever side won the close, which is a very blunt assumption. The absolute value depends on where the calculation started, so only the shape matters.