The whole rule in three lines
- The stock closed above yesterdayAdd all of today's volume to OBV.
- The stock closed below yesterdaySubtract all of today's volume from OBV.
- The stock closed unchangedOBV stays where it is.
A day-by-day example
| Day | Close | Volume | OBV |
|---|---|---|---|
| 1 | 10.00 Start | 100,000 | 0 |
| 2 | 10.20 Up | + 150,000 | 150,000 |
| 3 | 10.10 Down | − 60,000 | 90,000 |
| 4 | 10.30 Up | + 200,000 | 290,000 |
| 5 | 10.30 Unchanged | = 80,000 | 290,000 |
| 6 | 10.25 Down | − 50,000 | 240,000 |
We started from zero on day one. On day two the stock rose, so we added 150,000. On day three it fell, so we subtracted 60,000, reaching 90,000. And so on, up to 240,000 on day six. Start from a different number and every value shifts by the same amount while the shape stays identical.
The direction, not the number
That is why the OBV figure alone says nothing, and you cannot compare it between two stocks. What describes is its direction: if it is rising, volume on up days is outweighing volume on down days. If it is falling, the reverse.
Sometimes OBV rises while price moves sideways. That describes small up days carrying more volume than small down days. It is an observation about how volume is distributed, not an announcement of a coming move.
The indicator's limits
Look at the volume itself
Open any stock page on FoudaLens and compare volume on up days with down days over the last two weeks. That is exactly what OBV summarizes.
Check yourself
1. OBV was 500,000 yesterday. Today the stock fell on volume of 120,000. What is OBV now?
2. One stock has an OBV of 1 million, another 10 million. What does that mean?
Summary
- OBV adds up-day volume and subtracts down-day volume.
- The value itself is meaningless; its direction describes which days carried more volume.
- It ignores the size of a move, and one huge day can change the picture.