OBV (On-Balance Volume)
Volume tells you who's really in charge of the trend
Definition
On-Balance Volume (OBV) is a cumulative volume indicator developed by Joe Granville that relates volume to price changes. When price closes up, the day's volume is added to OBV. When price closes down, the volume is subtracted. The theory is that volume precedes price — if OBV is rising while price is flat, institutional accumulation may be occurring. OBV divergence from price is a key signal: rising price with falling OBV suggests the trend lacks conviction.
Example
SPX rallies for 5 consecutive days, but OBV declines — sellers are more active on the up days than buyers, a bearish divergence. This suggests the rally lacks volume conviction. When OBV subsequently confirms by falling while price breaks support, it is a stronger sell signal. Conversely, OBV rising while price consolidates signals accumulation ahead of a potential breakout.
Related Terms
Frequently Asked Question
What is OBV (On-Balance Volume)?
OBV is a running total of volume that adds volume on up days and subtracts on down days. Rising OBV confirms bullish trends; falling OBV confirms bearish trends. Divergence between OBV and price often warns of reversals.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.