OBV vs Volume
Volume is the number of shares traded in a day, shown as bars under the chart. OBV (on-balance volume) turns those bars into one running total: add the day’s volume when price closes up, subtract it when price closes down. Volume shows single-day activity; OBV shows the direction money has been flowing over weeks.
| Point | OBV | Volume |
|---|---|---|
| What it is | Running total of signed volume | Shares traded in each period |
| Shown as | A line | Bars |
| Uses price direction | Yes, up close adds, down close subtracts | No |
| What matters | Its direction, not its number | Size compared with normal days |
| Best for | Divergence and slow accumulation | Spotting spikes and confirming breakouts |
| Weakness | Treats a tiny up close the same as a big one | Hard to see a trend in daily bars |
How to read raw volume
Volume tells you how much interest there was in a move. A breakout on three times normal volume shows many participants agreed. A breakout on thin volume is easier to reverse. A sudden volume spike, without news, is worth a closer look.
How OBV adds to it
OBV links volume to direction. If OBV rises along with price, the move has real buying behind it. The actual number does not matter; only its slope does.
Its most useful signal is divergence. If price makes a new high but OBV does not, fewer buyers stood behind the second rally. A new high that volume doesn’t confirm often fails.
A worked example
Say a stock rallies from ₹200 to ₹240 on heavy volume, falls to ₹225, then climbs to ₹245 on much lighter volume. Looking at the bars, you might just notice volume “looked lower”. OBV makes it obvious: the line stays well below its earlier peak even as price makes a new high. That is a bearish divergence worth respecting.
When to use which
Use raw volume to judge a single day, like a breakout or a spike. Use OBV to see whether buying or selling has been building over weeks, and to catch divergence. Reading both gives you the short view and the long view of participation.
Common questions
Is OBV better than volume?
OBV is built from volume, so it is not a replacement. It is a way to see the trend in volume that daily bars hide.
Why does the OBV number not matter?
OBV starts from an arbitrary point, so its value depends on where the chart begins. Only its direction and divergences carry meaning.
What does rising volume with falling price mean?
It means selling is heavy and has wide participation. OBV would be falling sharply in that case.
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