OBV (On-Balance Volume): does volume confirm the trend?

OBV is a running sum that adds the day's volume on up days and subtracts it on down days, revealing where money is flowing.

The premise

Volume should precede price. The idea behind OBV is that smart money positions before the move is visible in the chart — buying on quiet down-days, selling on quiet up-days — and that this pressure shows up in the volume profile before it shows up in the price.

Mechanically: today's OBV = yesterday's OBV + today's volume (if close > prev close), − today's volume (if close < prev close), unchanged if close == prev close. The absolute number is meaningless — only the direction and slope matter.

Divergence is the only reliable read

OBV charts often look noisy. The signal worth watching is divergence between OBV and price. Price prints a higher high but OBV prints a lower high: the rally happened on shrinking volume, which is structurally weak. Conversely, OBV rising while price is flat or down: accumulation, often preceding a reversal.

How Signodex uses OBV

Signodex tracks OBV slope and divergence from price across the chart window. The AI Signal Analyst incorporates this into its hedge-language characterisation — for instance, "OBV is rising while price has consolidated, suggesting volume conviction beneath the surface" — without telling you to trade.