On-Balance Volume (OBV)
Developed by Joseph E. Granville · 1963
Quick Answer
On-Balance Volume (OBV) was developed by financial author Joseph E. Granville and introduced in his 1963 book "Granville's New Key to Stock Market Profits".
What is the On-Balance Volume?
On-Balance Volume (OBV) was developed by financial author Joseph E. Granville and introduced in his 1963 book "Granville's New Key to Stock Market Profits". OBV is one of the simplest volume indicators ever devised, yet it remains a staple of technical analysis because it captures something price alone cannot: whether buying or selling is dominant on an accumulation basis. Granville's core idea was that volume precedes price — if volume accumulates in one direction before price breaks out, that direction is the more probable path. OBV is most commonly applied to equities and futures because forex lacks true centralised volume, but tick volume in MetaTrader and futures-based volume for FX futures both produce useful OBV readings.
How It Works
OBV is a running total. On each up day — a candle that closes higher than the previous close — the volume is added to the cumulative total. On each down day, the volume is subtracted. Unchanged days contribute nothing. The resulting line is not bounded and its absolute value is meaningless — what matters is its direction relative to price. If price is rising and OBV is rising too, buying pressure is confirmed. If price is rising but OBV is falling, the move is unsupported and likely to fail. This is the essence of OBV divergence analysis: price and volume should move in agreement, and any disagreement is a warning.
Formula
If Close > Previous Close: OBV = Previous OBV + Volume
If Close < Previous Close: OBV = Previous OBV - Volume
If Close = Previous Close: OBV = Previous OBVHow to Read the OBV
- 1OBV rising with price: confirmed uptrend, buyers in control
- 2OBV falling with price: confirmed downtrend, sellers in control
- 3Price rising but OBV falling: bearish divergence, move at risk
- 4Price falling but OBV rising: bullish divergence, reversal possible
- 5OBV breakout before price breakout: leading signal
- 6Flat OBV in a trending market: participation weakening
- 7Sharp OBV moves indicate strong accumulation or distribution
Strengths and Weaknesses
Strengths
- +Captures the "strength" behind a price move
- +Leading indicator — divergences often precede reversals
- +Simple running-total calculation
- +Works on any asset with volume data
- +Effective for spotting stealth accumulation
Weaknesses
- −Forex lacks true centralised volume — tick volume is a proxy
- −Can produce large jumps on high-volume news days
- −Sensitive to unchanged-close treatment
- −No absolute scale — interpretation is always relative
- −Less useful in markets dominated by algorithmic flow
Best Timeframes
Daily and 4H charts are most reliable. Lower timeframes become noisy because short-term volume is heavily influenced by algorithmic order flow.
Best for: Spotting divergence between price and volume in trending markets, confirming breakouts, and identifying accumulation or distribution patterns.
Example Strategy
OBV Breakout Confirmation: On the daily chart, identify a horizontal resistance level that has been tested at least three times. Watch the OBV line: if it breaks above its own recent resistance before price does, that is a bullish lead. Enter long on the subsequent price breakout of the horizontal level, with a stop below the most recent swing low. The OBV lead adds conviction to the breakout and helps filter out false breaks where volume is not supporting the move.
This example is educational, not financial advice. Always backtest any strategy and manage risk with appropriate position sizing.
Related Indicators
Brokers That Offer the OBV
Any broker with MetaTrader 4, MetaTrader 5, or cTrader supports the OBV as a standard indicator. Below are our top EU-regulated picks.
Frequently Asked Questions
What is the On-Balance Volume (OBV)?
On-Balance Volume (OBV) was developed by financial author Joseph E. Granville and introduced in his 1963 book "Granville's New Key to Stock Market Profits". OBV is one of the simplest volume indicators ever devised, yet it remains a staple of technical analysis because it captures something price alone cannot: whether buying or selling is dominant on an accumulation basis. Granville's core idea was that volume precedes price — if volume accumulates in one direction before price breaks out, that direction is the more probable path. OBV is most commonly applied to equities and futures because forex lacks true centralised volume, but tick volume in MetaTrader and futures-based volume for FX futures both produce useful OBV readings.
Who developed the OBV?
OBV was developed by Joseph E. Granville in 1963.
What is the formula for the OBV?
If Close > Previous Close: OBV = Previous OBV + Volume If Close < Previous Close: OBV = Previous OBV - Volume If Close = Previous Close: OBV = Previous OBV
What timeframes work best with OBV?
Daily and 4H charts are most reliable. Lower timeframes become noisy because short-term volume is heavily influenced by algorithmic order flow.
What is OBV best used for?
Spotting divergence between price and volume in trending markets, confirming breakouts, and identifying accumulation or distribution patterns.