OBV, what is the line that adds and subtracts trading volume?
It is an indicator drawn by adding trading volume during periods of price increases and subtracting it during periods of price decreases.
Table of contents
Remember this first
First, 3 things to remember
- 1OBV adds or subtracts trading volume based on the price direction.
- 2It is not a figure calculated from the actual cash entering the company.
- 3Look at the changes in the line and the actual price together.
Think of it as a cumulative score created from trading volume.
OBV is a method where if the current closing price is higher than the previous closing price, the trading volume for that period is added. If it is lower, it is subtracted, and if it is the same, it remains unchanged. The final price is called the closing price.
Because it adds and subtracts each time and attaches it to the previous value, the absolute number can vary depending on the starting value and the calculation period. It is not the stock price or the company's cash balance.
Shall we try calculating with small numbers?
Starting at 0, if 100 shares are traded during an upward period, it becomes 100. If 80 shares are traded during the next downward period, 20 remains.
Trading volume for periods where the price was the same is not added or subtracted under this rule. The table below is a hypothetical example showing only the calculation method.
| Day | Change in closing price | Volume | OBV |
|---|---|---|---|
| 1 | Up | 100 shares | 100 |
| 2 | Down | 80 shares | 20 |
| 3 | Same | 50 shares | 20 |
It does not reveal the identity of the buyers.
An increase in OBV is not evidence that a specific institution has accumulated shares. It is the result of a calculation where trading volume is added during periods when the price rose.
If you see divergent patterns, such as the price falling while the OBV rises, first check the timeframe and data. Do not conclude that a rebound is imminent just because such a discrepancy appears.
You should not make such assumptions
“OBV has risen, so institutional accumulation is confirmed.”
It is a value obtained by adding and subtracting trading volume according to the rules. It does not show who actually invested how much.
Check what you have read.
- Do you know when trading volume is added?
- Have you distinguished between OBV and actual cash?
- Did you also look at the price?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- On Balance VolumeNew window
Fidelity Investments · Verify 2026-10-20
Volume accumulation based on closing price direction
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.