On-balance volume trend
TrendBeginner
On-balance volume adds the day's volume when price closes up and subtracts it when price closes down. Joseph Granville used the running total as a check on whether volume agrees with the price trend. A price high that OBV does not confirm is the warning. OBV does not produce a price target.
Not investment advice. Nothing here is a recommendation to buy or sell anything. Backtests and historical studies are not guarantees, and a rule that worked in one sample can fail in the next. Trading can lose money. Links are for education, not endorsements. Do your own research.
- Rules
- Compute a cumulative sum: plus volume on up closes, minus volume on down closes, unchanged on flat closes. In an uptrend, prefer longs while OBV is making higher highs with price. Treat a clear divergence, price at a new high while OBV stalls, as a reason to tighten a stop or skip a new entry. Do not buy OBV itself.
- Where AI fits
- AI can define divergence without hindsight, for example a 20-day price high while the OBV high is at least five days old, and then test that definition on unseen symbols. It can also drop sessions with bad volume prints. A model that 'sees' divergence on a chart screenshot is not a backtest.
- Markets
- Stocks and ETFs with reliable volume. Futures volume is exchange-specific and should not be mixed blindly across venues.
- Timeframes
- Daily.
- Risks
- A single huge volume day dominates the cumulative line for months. Splits, bad ticks, and off-exchange volume make the level meaningless even when the shape looks fine. Divergence can last a long time before price responds.