Volume and OBV (On-Balance Volume): the complete guide

What volume tells you

Volume is the number of units traded in a period. A price move on high volume involved many participants; the same move on thin volume involved few and is easier to reverse.

A common reading is that healthy trends see volume expand in the direction of the trend and contract during pullbacks. When prices keep rising while volume fades, the advance is attracting less participation.

How OBV is calculated

On-Balance Volume was introduced by Joseph Granville in 1963.

If close > previous close: OBV = previous OBV + volume
If close < previous close: OBV = previous OBV − volume
If equal: OBV = previous OBV

Only the direction of the line matters, not its absolute value, because it depends on where the calculation started.

Reading OBV

A rising OBV that confirms a rising price supports the move. A price making new highs while OBV fails to do so is a bearish divergence, a sign of weaker participation. The reverse pattern is a bullish divergence. A breakout from a range accompanied by an OBV breakout is generally considered more convincing.

Limits

• OBV counts a whole day’s volume as up or down depending only on the close, so it simplifies what really happened intraday.
• On decentralized markets such as forex, there is no central volume; tick volume is only a proxy.
• Crypto volume is spread across many exchanges, and some of it can be unreliable.
• Spikes from news, index rebalancing or expiries can distort the line.

Volume in InvestAI

InvestAI includes OBV and MFI among its volume-based indicators, grouped in the “Confirmation by volume” preset. When a market’s source provides no reliable volume, the app says the indicator is unavailable instead of computing on invented values.