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Market Intelligence › Basic Terminologies
The logic of On Balance Volume, and its version of divergence
Published by The Retail Trader · AUG 03, 2026 · Indicators
Volume bars are hard to read because they go up and down every day. OBV turns them into a running line so that a trend can show.
If the day closed higher, that day's entire volume is added to the line; if it closed lower, it is subtracted. That is all.
The reasoning is that volume often moves ahead of price — accumulation can show up in volume before it shows up in price.
OBV is often used in comparison:
• Price is making a new high but OBV is not — this is a divergence.
• OBV's own trend matching the price trend is treated as confirmation.
• Its absolute number is meaningless — only its direction matters.
• It puts the whole day's volume into a single bucket, so it is a rough approximation.
A divergence is a warning, not an entry signal. It can persist for months and the trend can go even further in the meantime — so its right use is to reduce risk, not to take the opposite position.
This article is for education only — it is not a buy or sell recommendation, makes no claim of a guaranteed return, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or the official source.