What is OBV?
A cumulative indicator that adds volume on up days and subtracts volume on down days to show buying/selling pressure.
Think of it like this
Like keeping a running score where you add points when the home team scores and subtract when visitors score.
Formula
OBV = Previous OBV ± Today's Volume (based on price direction)- Up Day: Add volume when close > previous close
- Down Day: Subtract volume when close < previous close
Why it matters
- Shows if volume confirms price trends
- Rising OBV with rising price = strong trend
- Divergences can predict reversals
- Volume precedes price
What's a good value?
Rising OBV + Rising Price
Bullish Confirmation
Strong uptrend, buyers in control
Falling OBV + Falling Price
Bearish Confirmation
Strong downtrend, sellers in control
Rising OBV + Flat Price
Accumulation
Smart money buying, breakout may come
Falling OBV + Flat Price
Distribution
Smart money selling, breakdown may come
Real-world example
If price makes new high but OBV doesn't, it's a bearish divergence warning of potential reversal.
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