On-balance volume
Also known as: OBV
On-balance volume is a cumulative indicator that tracks the flow of into and out of a in order to gauge whether buying or selling pressure is building. The underlying idea is that volume tends to lead price, so a change in the trend of on-balance volume can hint at a coming move in the itself before that move shows up clearly on the price chart.
The calculation is straightforward: on any day the closes higher than the prior day, that day's entire is added to a running total, and on any day it closes lower, that volume is subtracted. Days with an unchanged close leave the running total unchanged. The result is a single line that either climbs, indicating net buying pressure over time, or falls, indicating net selling pressure, regardless of how large or small the price move itself was on any given day.
The most common way traders use on-balance volume is to look for divergence between the indicator and the 's price. If a is making new highs but on-balance volume is failing to make new highs alongside it, that can suggest the rally is not being supported by genuine buying interest and may be vulnerable to a reversal. Conversely, a trading sideways or drifting lower while on-balance volume is rising can suggest accumulation is happening quietly before a breakout. Because it only reflects the direction of the close and not the size of the move, on-balance volume is typically used alongside and other indicators rather than as a standalone signal.