Definition
On-Balance Volume (OBV)
On-Balance Volume is a cumulative indicator that adds volume on up days and subtracts it on down days to track buying and selling pressure.
OBV builds a running total: it adds the day's volume when price closes higher and subtracts it when price closes lower. A rising OBV confirms that volume is supporting an uptrend, while OBV diverging from price — for example price rising but OBV falling — warns that the move lacks volume backing.
Indian traders use OBV on stocks and indices to confirm breakouts and trends and to spot accumulation or distribution before it shows clearly in price. It is a leading-style volume tool, best read for its direction and divergences rather than its absolute value.
Related terms
- BreakoutA breakout is when price moves decisively beyond a defined support, resistance, or pattern boundary, often starting a new move.
- DivergenceDivergence occurs when price and an indicator like RSI or MACD move in opposite directions, warning of a possible reversal.
- Money Flow Index (MFI)The Money Flow Index is a volume-weighted momentum oscillator that flags overbought and oversold conditions using price and volume.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.