OBV: signed candle volume, origin and divergence limits
On-Balance Volume cumulatively adds or subtracts whole candle volume based on whether the close rose or fell from the prior close.
Before this lesson
These lessons provide background; you can still read this page now.
What the indicator measures
On-Balance Volume cumulatively adds or subtracts whole candle volume based on whether the close rose or fell from the prior close. It is a close-signed activity series. It does not measure deposits, new capital entering an exchange or the actual difference between buyer- and seller-initiated executions.
Calculation and units
If close rises, add current volume; if it falls, subtract current volume; if unchanged, add zero. The initial OBV value is a convention. TradingHub starts it at zero on the first supplied candle. Consequently the level depends on the start of the history, even when later changes match.
Worked educational example
From a zero origin, an up-close bar with volume 10 produces OBV 10. A down-close bar with volume 7 changes it to 3. An unchanged close with volume 99 leaves it at 3. The last example shows that substantial activity can disappear from this signed summary.
Reading it without overclaiming
Compare OBV shape with consistently defined price pivots rather than interpreting its absolute number as money flow. A divergence can reflect different volume coverage, pivot selection or changing participation and does not guarantee a reversal. A single large bar can dominate the cumulative path for a long time.
How TradingHub implements it
The native setting defaults to EMA smoothing 1, meaning no smoothing. Larger values apply an EMA over OBV; this changes the displayed series rather than the original volume classification. Native origin and warmup follow the visible slice, so panning or loading more history can shift the level.
Comparisons that matter
Order-flow delta classifies sampled aggressive execution, whereas OBV signs all candle volume with one price comparison. MFI instead weights typical-price changes by volume. Do not label OBV as either a complete cumulative volume delta or a record of institutional buying.
A reproducible chart review
Open the existing Trading chart and choose the same market, interval and closed observation time as your comparison. Record every calculation parameter before changing one at a time. Match source fields, history length and the bar window. Native indicators calculate from the supplied visible slice; Indicator Studio calculates from its available chart snapshot. A difference after panning may therefore be a window or warmup effect rather than a new market event.
Limits and next lesson
The illustration uses constructed candles, not a dated market observation or a backtest. A live candle can change until it closes. Missing history, volume units and implementation conventions limit comparisons. No indicator guarantees a direction, an execution price or protection from loss. Use the related lessons to separate definitions, observed values and possible explanations; a correct quiz records learning progress, not trading competence.
Knowledge check
Does OBV classify every individual trade as buyer- or seller-initiated?
- Yes; it measures exchange deposits
- No; it signs whole candle volume using the close change
- Yes; it is identical to executed-trade delta
Show explanation
OBV’s candle-level rule is different from trade-level aggressor classification.
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Primary sources and scope
Educational scenarios are not execution guarantees, forecasts or personal recommendations. Check current product rules at their source.
Content revised: . Editorial responsibility: TradingHub. No independent professional certification is claimed.