On-Balance Volume Formula and Calculator

The on-balance volume (OBV) formula combines a security’s trading volume with the direction of its closing-price change to produce a cumulative indicator. Enter the previous OBV, current volume, and the two closing prices to calculate the new OBV and see how the calculation works.

Formula

OBV is a running total of volume, with the current period’s volume added, subtracted, or left out according to whether the closing price rose, fell, or stayed unchanged. In symbols:

• If today’s close is greater than the previous close: OBV today = OBV yesterday + today’s volume.
• If today’s close is less than the previous close: OBV today = OBV yesterday − today’s volume.
• If the closes are equal: OBV today = OBV yesterday.

The calculator expresses the same rule in one expression: previous OBV + current volume × (current close − previous close) ÷ absolute value of that price difference. The price-difference ratio is +1 for an up close and −1 for a down close. For equal closes, that expression cannot be evaluated because it divides by zero; the stated rule applies instead and OBV remains unchanged.

Here, previous OBV is the cumulative indicator value before the current period, measured in the volume units used by the data; current volume is the amount traded during the period in those same units; current close and previous close are the closing prices in the same currency and price scale. The first OBV value in a chart is an arbitrary starting point, commonly set to zero. Subsequent values depend on the chosen starting point, so the indicator’s direction and relative changes are generally more meaningful than its absolute level.

Worked Example

Using the calculator’s defaults, the previous OBV is 100,000 shares, current volume is 25,000 shares, the previous close is $50, and the current close is $51. The close rose, so add the period’s volume:

1. Price change = $51 − $50 = $1, which is positive.
2. OBV change = +25,000 shares.
3. Current OBV = 100,000 + 25,000 = 125,000 shares.

If the same day’s close had instead been $49, the calculation would subtract 25,000, giving 75,000 shares. If it had closed at $50, OBV would remain 100,000 shares, regardless of the volume traded that day.

Assumptions

• The current period and previous period are consecutive periods in the selected price series, such as trading days.
• Volume uses one consistent unit and source throughout; do not mix shares with lots or contract counts.
• Closing prices use the same currency, scale, and adjustment convention.
• The initial OBV value is supplied as a starting point; changing it shifts all later values by the same amount.

What OBV Measures

Joseph Granville popularized OBV as a way to relate trading volume to price movement. Its premise is a simplified one: volume on a period with a higher close is treated as positive, while volume on a lower close is treated as negative. OBV therefore tracks a cumulative volume balance, not the number of buyers versus sellers. Every completed trade has both a buyer and a seller; the indicator classifies the whole period’s volume using its closing-price direction.

OBV is often plotted beneath a price chart. A rising OBV means that, under this rule, volume added on up-closing periods has exceeded volume subtracted on down-closing periods over the interval. A falling OBV means the reverse. The value is not a price target, a percentage, or a forecast, and its magnitude is affected by the volume units and the chart’s starting point.

How to Read OBV and Its Limits

Readers commonly compare OBV’s trend with the price trend. If price and OBV are both making higher highs or higher lows, their directions agree. If price rises while OBV falls, or price falls while OBV rises, the movement is sometimes called divergence. Traders may treat that pattern as a reason to examine the chart more closely, but it does not guarantee a reversal or confirm what will happen next. OBV is one descriptive indicator, not a stand-alone signal.

• Check the same date range for price and OBV; mismatched periods can create misleading comparisons.
• Use consistent volume data. Exchange, broker, and chart-provider feeds can differ, especially for instruments whose volume is reported differently.
• Consider corporate-action adjustments and data revisions. A change in the historical price series or volume series can alter the indicator.
• Remember that a large-volume session affects OBV by the full volume even if the closing-price change is small. The formula considers only whether the close rose or fell, not the size of the price move.

OBV does not account for intraday price paths, the size of a price change, trading costs, or the reason volume occurred. It can also fluctuate sharply when volume is unusually high. Like other indicators derived from past prices and volume, it describes historical data and cannot establish future performance.

Common Calculation Questions

A frequent point of confusion is whether volume is multiplied by the percentage price change. In standard OBV, it is not: the price comparison determines only whether the full period’s volume is added, subtracted, or ignored. Another common mistake is restarting the cumulative total each day. OBV is carried forward from the prior period; only its chosen initial value is arbitrary.

Make sure the current close is compared with the immediately preceding close in the series. Comparing with an earlier close, or using the opening price instead, changes the indicator and is not the standard rule. Rounding the cumulative value unnecessarily can also introduce small discrepancies across a long series; use the source’s recorded volume values and preserve the cumulative sum at full available precision.

Frequently Asked Questions

What is the OBV formula?
When the close rises, add current volume to the prior OBV; when it falls, subtract current volume; when it is unchanged, carry the prior OBV forward.

Does OBV use the percentage change in price?
No. The direction of the close-to-close change determines the sign. Standard OBV adds or subtracts the entire current period’s volume.

What does a rising OBV mean?
It means the cumulative total is increasing because volume on up-closing periods has outweighed volume on down-closing periods over the observed interval. It does not by itself predict a price rise.

Why can two OBV charts show different values?
They may use different starting points, date ranges, volume units, price adjustments, or data feeds. A different initial OBV shifts the whole series without changing its subsequent rises and falls.

What happens to OBV if the closing price is unchanged?
OBV stays at its previous value. The period’s volume is neither added nor subtracted under the standard formula.

This calculator is a mathematical illustration; market data definitions and charting conventions can vary.

Related

• Loan Calculator: Calculate the Term to Repay
• M&T Bank Loan Calculator: Estimate Monthly Payments
• Loan Balance Payoff Calculator: Estimate Your Remaining Debt

in prev | Previous OBV | shares | 100000 | - | -
in vol | Current volume | shares | 25000 | 0 | -
in prevclose | Previous close | $ | 50 | 0.01 | -
in close | Current close | $ | 51 | 0.01 | -
out obv | Current OBV | shares | prev + vol * (close - prevclose) / abs(close - prevclose) | 0