Track cumulative buying and selling pressure through volume flow.
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Overview
On-Balance Volume (OBV) was developed by Joseph Granville and introduced in his 1963 book "Granville's New Key to Stock Market Profits." The concept is elegantly simple: on days when price closes higher, the day's volume is added to a running total; on days when price closes lower, the volume is subtracted. The result is a cumulative volume line that trends alongside — and often ahead of — price.
The core premise is that OBV captures the accumulation (buying) and distribution (selling) of institutional smart money. Large investors accumulate positions quietly over time, which shows up as consistently positive OBV without necessarily moving price significantly — until enough shares are accumulated that price must rise. This "divergence before breakout" pattern makes OBV a leading indicator.
A rising OBV in concert with rising price confirms the uptrend. A divergence — OBV declining while price rises — is a bearish warning that the rally is not being supported by volume and may reverse. The reverse holds for downtrends.
OBV is also used to detect "stealth accumulation": when price is range-bound but OBV is steadily rising, smart money may be building a position ahead of an upside breakout.
Strategy Code
This is a TradingView Pine Script example for this indicator. Paste it into the TradingView Pine Editor, add it to your chart, and adjust inputs for your market and timeframe.
//@version=6
strategy("On-Balance Volume (OBV)", overlay=true)
fastLen = input.int(20, "Fast Length")
slowLen = input.int(50, "Slow Length")
fast = ta.ema(close, fastLen)This is a thinkorswim ThinkScript example for this indicator. Open thinkorswim, create a custom study, paste the script, and apply it to your chart.
def obv = OnBalanceVolume();
def obvAvg = ExpAverage(obv, 21);
def trend = ExpAverage(close, 50);
def buySignal = obv crosses above obvAvg and close > trend;
def sellSignal = obv crosses below obvAvg or close < trend;Join thousands of traders who use auto-Trading to execute this strategy automatically, 24/7.
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