On-Balance Volume
OBV is the oldest money-flow tool: volume adds on up-closes, subtracts on down-closes, zero on flats — one cumulative line drawing the direction of volume as a leading shadow of price.
What it is
On-Balance Volume (OBV), introduced by Joe Granville in 1963: an up-close adds the day's full volume to the running total, a down-close subtracts it, a flat changes nothing — OBV = Σ(±Volume). Its philosophy: "volume precedes price" — big money entering or leaving must first leave traces in volume, and OBV accumulates the direction of volume into one curve. Price stalling while OBV moves first = the smart money is already moving. It is the ancestor of every money-flow indicator (A/D, MFI, CMF).
Origin
OBV comes from Granville's 1963 "Granville's New Key to Stock Market Profits" — home of the signature slogan "volume precedes price". Granville was one of the most influential technical analysts of the 1960s–80s (famed for calling the 1970s bear market; his later years grew controversial). The minimalist design (only close direction) is simultaneously its strength (a direction logic that cannot be gamed) and its weakness (insensitivity). MT5 ships it as iOBV.
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One line of math:
Minimal to the point of only a direction test — no magnitude weighting (0.1% and 5% closes count identically) and no close-position information (Chaikin's A/D exists precisely to fix that). Absolute values are meaningless (arbitrary anchors); the only reads are direction, slope and divergence.
Worked example
The classic "volume leads" scenario:
- Price ranges for six weeks: up-days shrink volume, down-days grow it — OBV drifts lower (net outflow) while price does not fall.
- Price then breaks down — looking back, OBV had been moving three weeks earlier.
- The mirror: price ranges while OBV keeps rising (down-days shrinking, up-days growing) — net accumulation; an upward resolution is brewing.
OBV's value is leading, not following — during ranges its direction often previews the next move. The plainest possible implementation of "volume precedes price".
How to read it
Reading OBV (direction / slope / divergence):
| Range | Common interpretation |
|---|---|
| OBV rising with price | Volume backs the rally — a healthy trend |
| OBV falling with price | Volume backs the decline — a healthy downtrend |
| Price new high without an OBV new high | Top divergence — the rally lacks real buying (the core signal) |
| Price new low without an OBV new low | Bottom divergence — selling lacks real volume; a rebound brews |
| OBV drifting one-way in a range | Accumulation/distribution in progress — the leading thread of the next break |
Absolute OBV values are meaningless — every platform accumulates from a different anchor. It has no OB/OS levels and no parameters — all information lives in the curve's shape versus price.
Common signals & usage
Top divergence
Price new highs without an OBV new high — volume does not back price: the classic top warning; strongest when resonating with momentum divergences.
Bottom divergence
Price new lows without an OBV new low — real selling pressure fading (someone is absorbing): a bottom brewing.
Range drift
Price in a box while OBV drifts one-way — accumulation/distribution; wait for the price-break direction to confirm the entry.
OBV trendline break
Draw trendlines on OBV — its break often leads the price trendline break (volume moves first).
Limitations & common mistakes
- The magnitude blind spot: 0.1% and 5% closes book identically — small fake breakouts and big bars are indistinguishable to OBV (A/D/CMF fix this).
- Gaps carry no weight: OBV only compares closes — gaps themselves leave no trace (gap-heavy instruments need A/D/CMF).
- The tick-volume discount: forex volume is quote-tick count — the money semantics weaken under tick convention; direction survives, precision drops.
- The arbitrary anchor: absolute values do not compare across platforms — read shapes only, never numbers.
- Range noise: alternating up/down closes make OBV saw back and forth — a drift signal needs 2–3 weeks of persistence to count.
OBV in MT5
OBV is a built-in MT5 volume-class indicator (single sub-window line). The MQL5 function for programmatic use is iOBV:
| MQL5 function | iOBV() |
| Algorithm | Σ(±Volume) (sign set by the close direction) |
| Volume type | VOLUME_TICK / VOLUME_REAL (selectable) |
| Buffers | 0=main buffer (cumulative value) |
| Display window | Sub-window (cumulative curve, no guides) |
iOBV takes no period parameter. applied_volume selects tick or real — forex has only tick. In code, remember the anchor arbitrariness: compare OBV changes (differences) rather than absolute values; divergence detection compares the respective new highs/lows of price and OBV.
Behavior across timeframes
15-minute
Intraday up/down alternation makes OBV noisy — take only drifts agreeing with the larger-trend direction
1-hour / 4-hour
A usable swing period for accumulation/distribution monitoring
Daily
The classic home: divergences and range drifts are most representative on dailies
Weekly
The weekly OBV direction = quarter-scale money flow — a long-term background call
Indicator combinations
Common pairings for OBV:
- With A/D: OBV books direction, A/D books intraday position — when both money lines agree, the call is solid. AD
- With MFI: OBV reads the cumulative flow, MFI reads overbought/oversold extremes — the ledger-plus-thermometer combo. MFI
- With MA: the MA sets the price trend, OBV verifies the volume backing — trend plus money double confirmation. MA
FAQ
Q My OBV reads 500 million — what does that mean?
Nothing by itself — OBV is cumulative and the total depends on when accumulation started (every platform and data reload uses a different anchor). The only reads: direction, slope, and divergence versus price. The number itself is meaningless.
Q How is OBV different from A/D?
The weighting differs: OBV only compares closes (up books +Vol, down −Vol, magnitude irrelevant); A/D weights by where the close lands in the day's high-low range (CLV). A/D is Chaikin's refinement — more sensitive to the intraday fight, at the cost of complexity.
Q Why is OBV called "volume precedes price"?
Granville's observation: big money entering or leaving must leave volume traces — price ranges while OBV drifts one-way means the smart money is already accumulating or distributing, and the price break that follows often follows OBV. It is the simplest implementation of that hypothesis.
Q Is OBV reliable on forex?
Direction yes, precision reduced: forex has no central exchange and MT5 volume is tick count — correlated with real turnover but a different unit. Divergence and drift signals still work under the tick convention, though with less reliability than real-volume markets — cross-check with price structure for important decisions.
Q How do I add OBV in MT5?
Menu: Insert → Indicators → Volumes → On Balance Volume, or drag it from the Navigator onto a sub-window. No parameters (only tick/real volume choice) — no guides needed; read direction and divergence.
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