On-Balance Volume (OBV) — Background Trend

What OBV Means

OBV stands for On-Balance Volume.
It’s a volume-based indicator that helps you see whether money is flowing into or out of a stock or index.

Think of OBV as a “running total” of buying and selling pressure.

⚙️ How It Works

OBV starts at zero and then adds or subtracts each day’s trading volume based on the day’s closing price:

If today’s close is higher than yesterday’s → OBV goes up by that day’s volume.

If today’s close is lower → OBV goes down by that day’s volume.

If the price is unchanged → OBV doesn’t move.

Over time, this creates a line that moves up and down with volume pressure.

📈 What OBV Tells You

Rising OBV → Buying Pressure

More volume is happening on up days.

It means traders are accumulating shares.

Often a bullish signal.

Falling OBV → Selling Pressure

More volume is happening on down days.

It means traders are distributing (selling) shares.

Often a bearish signal.

Flat OBV → No clear direction

Volume is balanced.

The market is waiting for a breakout.

🧠 How Traders Use It

Trend Confirmation:
When price goes up and OBV goes up too → the move is healthy and supported by volume.
If price goes up but OBV stays flat or falls → the move might be weak or false.

Divergences:
If price makes a new high but OBV doesn’t → it’s a warning that the trend may reverse soon.

Signal Line Crossovers (like your chart):
You can smooth OBV with an EMA (moving average).
When OBV crosses above its EMA → possible buy signal.
When OBV crosses below → possible sell signal.

🟢 In Simple Terms

OBV tells you “is the smart money buying or selling?”

Green / rising = buyers in control.

Red / falling = sellers in control.

It’s a quick way to confirm if price trends are backed by real trading activity — not just short-term noise.