What it means
On-Balance Volume (OBV) is a cumulative volume indicator. On up-days (close > prior close), the session's volume is added to the running total. On down-days, subtracted. On unchanged days, no change. The result is a running total that rises when buying pressure dominates and falls when selling pressure dominates. Created by Joe Granville in 1963.
Why it matters
OBV captures accumulation/distribution dynamics independent of price. Rising OBV during a price decline = accumulation underway (smart money buying weakness). Falling OBV during a price rally = distribution (smart money selling strength). OBV divergences from price are among the cleanest reversal signals for stock and crypto analysis.
How to use it
Track OBV trend alongside price. OBV-price divergences: bullish (price lower low + OBV higher low) signal accumulation; bearish (price higher high + OBV lower high) signal distribution. Combine with structural setups for highest conviction.
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
Ask Rocky