On-Balance Volume Calculation and Formula

On-balance volume (OBV) is a running total of trading volume that adds volume when a security closes higher and subtracts it when it closes lower. Enter the prior OBV, the current period’s volume, and both closing prices to calculate the new OBV and see the signed volume change.

Formula

OBV uses the direction of the closing-price change to decide whether to add or subtract the period’s volume. In symbols:

• If today’s close is greater than the previous close: OBV today = OBV yesterday + today’s volume.
• If today’s close is lower than the previous close: OBV today = OBV yesterday − today’s volume.
• If the two closes are equal: OBV today = OBV yesterday; the period contributes no change.

The calculator expresses the first two cases compactly as new OBV = previous OBV + volume × (current close − previous close) / |current close − previous close|. The fraction is +1 for an up close and −1 for a down close. When prices are equal, the change is zero and the OBV remains unchanged; a real implementation must apply that equal-close rule rather than divide by zero.

• Previous OBV is the cumulative indicator value at the end of the prior period, measured in the same volume units as the data.
• Current volume is the traded quantity reported for the current period, such as shares, contracts, or units.
• Current close and previous close are the closing prices for consecutive periods, expressed in the same currency and price scale.

OBV has no inherent starting value. A charting system typically selects an initial value, often zero, and then applies the rule period by period. Changing that starting point shifts every later OBV reading by the same amount, but it does not change the sequence of rises and falls.

Worked Example

Using the calculator’s defaults, the previous OBV is 0 shares, current volume is 10,000 shares, the current close is $102, and the previous close is $100.

1. Find the closing-price change: $102 − $100 = $2, so the close is higher.
2. Assign the volume a positive sign: signed volume change = +10,000 shares.
3. Add it to the prior reading: new OBV = 0 + 10,000 = 10,000 shares.

The $2 price difference determines direction only; it does not multiply or scale the volume. The output is 10,000 shares, not 20,000 dollar-shares.

How to Calculate OBV Across Multiple Periods

For a series, calculate the result in chronological order. Each new OBV becomes the previous OBV for the next period. For example, begin at 0; if volume is 10,000 on an up-close day, OBV becomes 10,000. If the next day closes down on volume of 7,000, OBV becomes 3,000. If the following close is unchanged, OBV stays at 3,000 regardless of that period’s volume.

This is why OBV is called cumulative: its value reflects the signed volume of every period since the chosen starting point. To reproduce a chart reading, use the same data frequency, price series, volume source, and starting history as the chart. A daily calculation can differ from an intraday calculation because the periods and their closing prices differ.

How Traders Interpret the Indicator

OBV is used as a way to compare volume flow with price movement, not as a direct forecast. Some analysts look for OBV and price moving in the same direction as a sign that volume is accompanying the trend. If price rises while OBV falls, or price falls while OBV rises, the mismatch is often called divergence and may prompt closer examination.

These patterns are interpretations, not guarantees or standalone trading signals. OBV does not say how much a security should rise or fall, and its absolute level is not comparable across unrelated securities or chart histories. It records whether each period’s total volume is assigned a positive or negative sign; it does not identify which side of a trade initiated the transaction or prove that buyers or sellers are in control.

Data Choices and Common Calculation Problems

• Equal closes: Add nothing and subtract nothing. The OBV line stays flat even if volume is large.
• Consistent periods: Compare consecutive closes from the same interval. Mixing daily volume with an intraday price comparison produces a different, inconsistent calculation.
• Volume units: Keep the volume convention consistent. A value recorded in thousands must be handled consistently with values recorded as individual shares; otherwise the scale will be off.
• Price adjustments: Splits and other data adjustments can affect historical prices and reported volume. Use a consistent data series from the same provider when reproducing an indicator.
• Missing or unusual data: A missing close or volume value can interrupt the sequence. Do not silently treat missing volume as zero or carry a stale price forward unless the data source’s method explicitly calls for it.
• Starting point and rounding: OBV’s base value is arbitrary, but later values depend on the volume series. Preserve full volume precision where available; rounding intermediate values can create discrepancies.

OBV Compared with Other Volume Measures

OBV is simpler than indicators that weight volume by the size or location of the price move. It assigns all volume in a period the same sign based only on whether the close is up or down. A small up close and a large up close therefore add the same volume if their volumes are equal. Other volume indicators may incorporate more price information, but their formulas and assumptions differ.

OBV is also not the same as raw volume. Raw volume shows how much traded in a period without assigning direction. OBV turns that series into a cumulative line using closing-price direction as a proxy. That makes it easy to calculate, but also means it can miss intraperiod price action: the close alone determines the sign.

Frequently Asked Questions

What is the formula for on-balance volume?
When the close rises, add current volume to the previous OBV. When it falls, subtract current volume. When it is unchanged, carry the previous OBV forward.

What happens to OBV when the closing price does not change?
OBV does not change. The period’s volume is neither added nor subtracted.

Does the size of the price change affect the OBV calculation?
No. The price change sets the direction only. The full period volume is added or subtracted, whether the close moved slightly or substantially.

Can OBV be negative?
Yes. Starting from zero, a run of down-close periods can produce a negative cumulative value. The sign depends on the chosen starting point and history, so the trend in OBV is generally more meaningful than whether its level is positive or negative.

Why does my OBV differ from a charting platform?
Possible causes include a different starting point, time interval, data vendor, volume convention, price-adjustment method, or history length. Check that all inputs and settings match before comparing values.

OBV is a mechanical summary of signed volume, and its usefulness depends on consistent data and cautious interpretation; it does not establish what a future price will do.

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in prev | Previous OBV | shares | 0 | - | -
in vol | Current volume | shares | 10000 | 0 | -
in close | Current close | $ | 102 | 0.000001 | -
in prior | Previous close | $ | 100 | 0.000001 | -
out obv | New OBV | shares | prev + vol * (close - prior) / abs(close - prior) | 0
out change | Signed volume change | shares | vol * (close - prior) / abs(close - prior) | 0