OBV Indicator Unlocks the Secrets of Trading Volume: A Tool Traders Should Not Overlook

FOMOSapien · 2025-12-24T15:24:38+00:00

The OBV (On Balance Volume) indicator is essential in trading as it quantifies buying and selling pressure, revealing market dynamics that drive price movements. Developed by Joseph Granville in 1963, it emphasizes that volume trends are fundamental to understanding price trends. OBV is calculated by adding or subtracting volume based on price changes, providing traders insight into market sentiment.

FOMOSapien

2025-12-24 15:24:38

Abstract generation in progress

In the world of trading and investing, the importance of reading the market is not solely about predicting prices based on assumptions. It also requires studying the actual trading volume occurring in each period. Because the true price movements stem from the behavior of market participants, the OBV indicator is a tool that helps traders understand this dynamic more effectively.

Why is the OBV Indicator Important?

The OBV (On Balance Volume) indicator exists because of a principle long accepted in technical analysis: “Trading volume is the true driver of price.” If we can measure the accumulated buying and selling pressure, we can better see how sustainable the current trend might be.

It is no coincidence that Joseph Graniville developed this OBV indicator back in 1963, because his idea is simple yet powerful: prices rising with high volume are strong, while prices rising with low volume are weak and prone to breakdown.

What is the OBV Indicator: Basic Understanding

Simply put, On Balance Volume is a momentum indicator calculated from the accumulated trading volume, following these rules:

When the closing price increases compared to the previous candle → volume is added to OBV
When the closing price decreases → volume is subtracted from OBV
When the closing price remains unchanged → OBV does not change

The calculation process is straightforward, but the results are highly useful for trend analysis because OBV helps us see “who is buying” and “who is selling” in each period.

OBV Formula and Calculation Method

Basic formula

View Original

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.