1
Calculation
Add volume when the close rises, subtract it when the close falls, and keep it unchanged on equal closes.
Lesson · Volume and Order Flow
On-Balance Volume
Use On-Balance Volume to accumulate volume by closing direction and compare its trend with price.
Core concepts
What to understand
Keep the interpretation direct: participation, aggressive side, and actual price progress.
2
Confirmation
Price and OBV making compatible highs or lows supports the observed trend.
3
Divergence
Price progresses while OBV fails to confirm, indicating weaker volume participation.
Interactive lab
Change the market conditions
Use the controls and read the “What the market is doing” explanation after each change.
On-Balance Volume Lab
Synthetic educational data · no live market connection
MARKET DATA
Reading process
Follow the reading steps
Do not jump from one number to a trade. Describe the evidence first.
Read price structure
Mark higher highs, lower lows, or a range.
Read OBV structure
Compare OBV swings over the same bars.
Describe agreement
State whether volume participation confirms or diverges from price.
Knowledge check
Check your interpretation
Select one answer for each question. Feedback appears immediately.
1. A bar closes above the prior close. OBV does what?
OBV adds the entire bar volume on an up close.
2. Price makes a new high but OBV does not. This is:
Volume participation is not confirming price's new high, but price confirmation is still required.
3. Closes are 100, 101, 100, 102 on volumes 500, 800, 300, 400. What is OBV after the fourth bar, starting from zero?
Bar 2 closes up: +800. Bar 3 closes down: −300. Bar 4 closes up: +400. 800 − 300 + 400 = 900; the first bar contributes nothing.
4. What matters most about OBV?
OBV is cumulative, so structure and direction are more useful than the raw level.
Practical rules
- Focus on OBV direction and swings, not its absolute number.
- Compare matching price and OBV points.
- Treat divergence as a warning, not an entry by itself.
Common mistakes
- Calling OBV true buy/sell volume.
- Comparing OBV values across symbols.
- Trading every small divergence.
References
Official reading
The lab is simplified; these sources provide the underlying market and execution definitions.
CME Group · What is Volume?
Official overview of how futures volume is counted and interpreted.