OBV: On-Balance Volume Explained

On-Balance Volume (OBV), created by Joe Granville in 1963, runs on one brutally simple rule: add the bar's volume on up closes, subtract it on down closes. The running total draws a picture of who is committing money — and when that picture disagrees with price, price usually loses the argument.

How OBV Works

OBV's absolute number means nothing; its shape means everything:

• OBV rising with price: volume confirms the trend — healthy.
• OBV flat while price rises: the rally is running on fumes.
• OBV rising while price is flat: quiet accumulation — someone is buying the range.

Granville's thesis: volume leads price. Smart money accumulates before the breakout, and OBV shows it.

How to Trade It

1. Divergence. Price makes a new high, OBV doesn't — distribution is underway; tighten stops or fade the move. The mirror marks accumulation at lows.

2. Breakout confirmation. Only take price breakouts when OBV breaks its own corresponding level; volume-less breakouts are the classic trap.

3. OBV trend cross. Put a moving average on OBV itself and trade OBV crossing it — a pure money-flow trend signal.

Building It in Setup.Cash

Add OBV in the strategy builder (it needs volume data, so it shines on crypto and stocks). Condition on OBV against its own moving average, or use it as a confirmation gate for entries from Donchian breakouts or Support/Resistance zone breaks.

OBV's Relatives

The extended library carries the whole family: Accumulation/Distribution (weights by close position within the bar), Chaikin A/D Oscillator, Price Volume Trend (scales by percent change), Klinger Volume Oscillator, and Archer OBV. Also see MFI and CMF for bounded money-flow readings.

Volume is the only leading data most charts have. Backtest OBV confirmation on your breakout system — it usually cuts the false-break rate meaningfully.