On Balance Volume (OBV) on a Live Bitcoin Chart

What it shows

The OBV line has its own pane, and its level has no meaning on its own because it depends on where the count began; what matters is its direction and whether it agrees with price. An optional second line, an average of the OBV, is off by default.

How Pravex works it out

Compare each candle’s close with the previous close.
Higher close: add the candle’s volume. Lower close: subtract it. Equal close: add nothing.
Keep a running total of those steps from the first candle on. That total is the OBV line.
With a second line type picked, an average of the OBV is drawn over it. SMA + Bollinger Bands also adds bands the set number of standard deviations around that average.

Settings

Setting	Default	What changing it does
Second line type	None	The kind of average drawn over the OBV: None, SMA, SMA + Bollinger Bands, EMA, SMMA (RMA), WMA or VWMA. With None only the OBV line shows.
Second line length	14	How many OBV values feed the second line. The field shows up once the type is anything but None.
Band width in standard deviations	2	Applies to SMA + Bollinger Bands only: the gap between the OBV average and each band, in standard deviations.

How traders read it

The line is read by its slope. OBV rising along with price says volume is backing the climb. If price makes a new high and OBV does not, the latest rise came on less volume than earlier ones.

A breakout in OBV before price breaks out is a common thing to watch for. It means volume has been leaning one way for a while even though price has been flat.

Turning on an average makes the signal easier to see. OBV crossing above its own average says the recent volume balance has turned up.

When it misleads

OBV treats a candle as all up or all down by one comparison of closes, so a tiny close above the last one adds the entire volume. One huge volume candle can move the line more than a week of ordinary ones, and the line starts from zero at the first candle loaded, so two charts with different history show different levels. On a market with no volume the count stays at zero.

Questions and answers

What does rising OBV mean?

More volume has traded on up closes than on down closes over the stretch you are looking at. It says nothing about how big the price moves were.

Why does the OBV number look so large?

It is a running total of volume from the first candle on the chart, so it grows with history. Read the direction of the line and ignore the level.

Why is my OBV different from someone else’s?

The total starts at zero on the first candle each chart loads. Two charts with a different amount of history, or volume from a different exchange, end at different levels. The slope over the same stretch is what you can compare.

What happens to OBV on a candle that closes unchanged?

Nothing. If the close equals the previous close, the candle adds no volume either way, however much traded during it.