What Is OBV?
On-Balance Volume (OBV) is a cumulative momentum indicator that relates volume to price change. On days when price closes up, the day's volume is added to the running total; on days when price closes down, it's subtracted. The theory is that volume precedes price — smart money accumulation or distribution appears in OBV before it shows up in price.
How OBV Works
OBV's absolute value doesn't matter — the direction and pattern of the OBV line is what matters. A rising OBV confirms an uptrend; a falling OBV confirms a downtrend. OBV making new highs ahead of price is especially bullish. OBV breaking a trendline can precede a price trendline break by several periods.
Why It Matters for Traders
OBV divergence is one of the most underrated signals in crypto technical analysis. When price makes new highs but OBV doesn't, it signals that the rally is running on decreasing conviction — a warning that a reversal is approaching. OBV works especially well in crypto because volume data is transparent and significant moves are almost always volume-driven.
