On Balance Volume (OBV) is a momentum indicator that plots a running total of the volume. OBV is charted using three variables: the closing price, the trading volume and the trend direction (ie. whether the most recent close is above, below or equal to the previous close).
If the most recent close is higher than the previous close, then today's OBV would be yesterday's OBV plus today's trading volume.
If the most recent close is lower than the previous close, then today's OBV would be yesterday's OBV minus today's trading volume.
If today's close is the same as yesterday's close, then today's OBV is the same as yesterday's OBV.
Joe Granville introduced On Balance Volume back in the 1960s. He believed that large price movements are preceded by increases in volume. Accordingly, a rising (or lower) OBV value could be a precursor to a rising (or falling) share price. Traders can also use OBV to identify divergences. It could be a bullish (bearish) signal if the OBV is rising (falling) while price is falling (rising).