On Balance Volume (OBV)

Overview

On Balance Volume represents one of technical analysis's most enduring insights: that volume is the driving force behind all market movements. Joe Granville's 1963 masterwork "Granville's New Key to Stock Market Profits" introduced OBV with the metaphor of a "spring being wound tightly" - when volume increases sharply without corresponding price movement, the market is storing energy for an explosive move. The calculation is elegantly simple: add the day's volume when price closes higher, subtract it when price closes lower, and keep a running total. This cumulative approach reveals the flow of volume over time, distinguishing between accumulation (rising OBV) and distribution (falling OBV).

The genius of OBV lies in its ability to track the footprints of institutional investors - the "smart money" that moves markets. Granville theorized that large institutions accumulate positions quietly, causing volume to increase before price follows. Conversely, when institutions distribute shares, volume patterns change before the price decline becomes apparent. The absolute value of OBV is meaningless; what matters is the direction and slope of the OBV line relative to price. When OBV rises while price remains flat or falls, it signals accumulation and an impending upward move. When OBV falls while price stays flat or rises, distribution is occurring and prices will likely follow volume lower.

Interpretation & Trading Signals

Example Usage

Code examples will be available once the Rust implementation is complete.