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💧 Supply and Demand · OBV

OBV — On-Balance Volume Complete Guide
Reading Accumulation Signals

OBV (On-Balance Volume) accumulates trading volume based on price direction. Even if the stock price is stagnant, if OBV steadily rises it signals that accumulation is quietly taking place at lower price levels.

💡 Key Takeaway — When the price is quiet, if OBV rises, it indicates hidden accumulation. This is based on the idea that volume moves before price, making it an indicator that reads the influence of large players on the chart first.

What is OBV (On-Balance Volume)?

OBV (On-Balance Volume) is a supply and demand indicator that shows "whether money is coming in or going out" as a single line based on the direction of price. It is a classic indicator introduced by Joe Granville in 1963, and the core premise is simple — volume moves before price. Even when the price is quiet, the flow of volume reveals the influence of large players first.

Calculation Method — The Direction of Accumulation is Everything

OBV is a simple cumulative total.

  • If the closing price is higher than the previous day → add that day's volume to the total
  • If the closing price is lower than the previous day → subtract that day's volume from the total
  • If unchanged → no change

Therefore, the absolute number of OBV is meaningless; direction and trend are key. If the stock price is stagnant but OBV continues to rise, it means that the volume on up days is greater than on down days — indicating quiet accumulation.

How to Read Accumulation Signals

Large funds tend to accumulate shares in chunks to avoid driving up the price, so during accumulation, an imbalance in volume appears before price changes. This can be quantified as the ratio of the sum of volume on up days to the sum of volume on down days (updown volume).

DawnScan Criteria — If the sum of up day volume over the last 10 trading days ÷ sum of down day volume ≥ 1.3, it is considered an OBV accumulation signal, and if it is 2.0 or higher, it indicates strong accumulation and increases the weighted score.

OBV Divergence

The strongest signal is the divergence between price and OBV.

  • Bullish Divergence — Price is stagnant or falling while OBV is rising → indicates hidden accumulation, and the price tends to follow OBV upwards
  • Bearish Divergence — Price is rising while OBV is falling → indicates a weak rise unsupported by volume

Why It Should Be Viewed with Other Signals

OBV indicates the direction of supply and demand but is weak in timing and trend strength. Therefore, DawnScan does not use OBV accumulation alone, but combines it with Bollinger Squeeze (volatility contraction)· ADX (trend formation)· RSI (momentum)· Relative Strength (strength compared to the market). Accumulation + Contraction + Strength overlapping on a single stock is a significant position. For the overall combination method, refer to pre-breakout early signal overview and methodology.

Warning — An OBV accumulation signal does not guarantee a rise. False signals and large player exits can occur, and all information is for reference only. Investment responsibility lies with the individual.

Check Now

Stocks with OBV accumulation detected today can be checked along with other signals in Today's Scan.

Frequently Asked Questions

How is OBV calculated?

OBV is calculated by adding the day's volume to the cumulative total when the closing price is higher than the previous day, and subtracting it when it is lower. Direction and trend are more important than absolute numbers. If the stock price is stagnant but OBV continues to rise, it means that the volume on up days is greater than on down days.

What are the key conditions for an OBV accumulation signal?

DawnScan considers it an OBV accumulation signal when the sum of up day volume over the last 10 days is at least 1.3 times the sum of down day volume. If the ratio is 2 times or more, it is considered a strong accumulation signal and increases the weighted score.

What is OBV divergence?

When the price is falling (or stagnant) but OBV is rising, it is called 'bullish divergence'. This suggests that hidden accumulation is taking place, and the price often rebounds following OBV. Conversely, when the price is rising but OBV is falling, it is 'bearish divergence'.

Can I buy based solely on the OBV signal?

It is not recommended. OBV shows the flow of supply and demand, but its reliability increases when viewed alongside trend direction (ADX), momentum (RSI), and volatility contraction (Bollinger Squeeze). DawnScan combines these signals into a composite score.
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Bollinger Band Squeeze
Volatility contraction viewed with OBV
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RSI Momentum
Confirming momentum after OBV accumulation
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Relative Strength (RS)
Assessing strength of supply and demand compared to the market

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