Have you ever stopped to understand what OBV means? I was analyzing some technical indicators and realized that many people don’t really grasp how this indicator works.

OBV (On-Balance Volume) is basically a method for predicting price movements using volume. The idea is simple: when the price closes above the previous close, you add that volume. When it closes below, you subtract it. This helps you see the real buying and selling pressure in the market.

The creator of all this was Joseph Granville, who had a very clear philosophy: volume is the engine of the markets. According to him, price only truly moves when volume makes noise. If volume explodes, the price will move in some direction.

Now, to understand what OBV means in practice: you use divergences. When OBV falls but the price rises, or vice versa, something strange is going on. A bearish divergence appears when OBV closes below the previous low. A bullish divergence is the opposite.

One important thing I learned: OBV doesn’t work alone. During very sharp volume spikes, the indicator gets a bit confusing. In those moments, it’s better to wait for the market to calm down a little before making a decision.

The indicator only works in markets with real trading volume. It’s similar to other volume-based indicators like the Klinger or the Money Flow Index.

For anyone looking to spot breakouts of resistance, paying attention to the closes that dominate OBV is a good strategy. But remember: what OBV means is a tool for you to use alongside other analyses, not as absolute truth. Volume comes before price, so if you have a clear view of that, you can anticipate price moves better.