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2003issue C051

Constructing on-balance volume from signed session volume

On-balance volume is a running total of session volume signed by whether the close is above or below the prior close. The path of that total is read as a rising-trend, a falling-trend, or a doubtful-trend, and a reversal of an established path is treated as an obv-breakout whose next test is a price breakout.

  • Add up-volume after a higher close, subtract down-volume after a lower close, and leave the running total unaltered on an unchanged-close.
  • Read a rising-trend from successive peaks that exceed the prior peak, a falling-trend from successive troughs that undercut the prior trough, and a doubtful-trend from sideways price action that fails to print successive highs or lows.
  • A flip from rising to falling or falling to rising, or a doubtful-trend that lasts more than three days, is a trend-break. A two-day doubtful interruption that then resumes the prior direction is treated as if the original trend never broke.
  • Use the running total as a leading signal: an obv-breakout is meant to precede a price breakout, while price leading the total is a nonconfirmation associated with bull-market tops or bear-market bottoms.
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Current trackOn-balance volume88 readings

How the running total is built

On-balance volume is constructed as a cumulative series that adds a session’s volume after a higher close and subtracts that session’s volume after a lower close. The added amount is up-volume. The subtracted amount is down-volume.

If the current close equals the prior close, the session is an unchanged-close and the on-balance volume total is left unchanged.

How the path is classified

A rising-trend is read from successive peaks that each exceed the prior peak. A falling-trend is read from successive troughs that each undercut the prior trough.

Sideways price action that fails to print successive highs or lows is classified as a doubtful-trend. That sideways stretch leaves the on-balance volume direction unclassified.

When the classified trend is broken

An established on-balance volume trend is treated as broken if the series reverses from a rising-trend to a falling-trend or from a falling-trend to a rising-trend, or if it stays in a doubtful-trend for more than three days. Either case is a trend-break.

A two-day doubtful interruption that then resumes the prior direction is treated as if the original on-balance volume trend never broke.

How the construction is used as a leading signal

The construction is used as a leading signal. A change in the running volume total is expected to appear before a corresponding change in price.

When price moves first and on-balance volume does not confirm, the mismatch is labeled a nonconfirmation. That nonconfirmation is associated with bull-market tops or bear-market bottoms.

The method treats a reversal of the established on-balance volume trend as an obv-breakout. The intended follow-through is a subsequent price breakout.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
37 of 61 in the On-balance volume track
20031-1 pp.Next on On-balance volumeOn-balance volume as a market-breadth participation ledgerOn-balance volume adds a session's volume on a higher close, subtracts it on a lower close, and holds steady on an unchanged close.
All readings on this track · 61 readings
  1. 1988Cumulative volume trend and 200-session polarity
  2. 1988Three clocks when cumulative volume led price
  3. 1988Payoff index checkpoints for open interest and divergence
  4. 1988Relative strength, stochastics, and on-balance volume as a turning-point stack
  5. 1988Signing volume by open interest change
  6. 1988Case study: weekly on-balance volume with trendlines and a 21-period average
  7. 1988Combining weekly and daily MACD divergences with on-balance volume
  8. 1988Restoring the original tests for market breadth, on-balance volume, and trendlines
  9. 1989Evaluating volume-weighted breadth extremes
  10. 1989Demand oscillator construction with a momentum overlay
  11. 1989Constructing a volume percentage ratio from advance-decline flow
  12. 1990Constructing net positive volume as On-balance volume
  13. 1990Buying-share scale with on-balance volume
  14. 1990Friday-filtered on-balance confirmation lines
  15. 1991Constructing rate-market volume breadth from on-balance volume
  16. 1991Building a breadth composite from on-balance volume breakouts
  17. 1992Constructing a rate-complex volume-breadth index
  18. 1992Constructing a breadth index from on-balance volume
  19. 1992Constructing signed market thrust from issue volume
  20. 1992Constructing indicator phase across averages, volume and bands
  21. 1993Force on-balance volume to agree with itself at slower horizons
  22. 1993Three transforms of market thrust from breadth and volume
  23. 1994Constructing a tick-line momentum oscillator
  24. 1994Constructing a smoothed on-balance tick momentum oscillator
  25. 1994Histogram confirmation and a second-series veto for MACD-family alerts
  26. 1994Constructing a 40-period envelope on on-balance volume
  27. 1996Constructing a matched percent-B volume disparity
  28. 1997Constructing calendar regime overlays and volume-weighted rules
  29. 1997Constructing market thrust from breadth and volume
  30. 1997Constructing on-balance volume as a signed running total
  31. 1997A three-layer construction for a signed volume-force oscillator
  32. 1997Constructing a range-sum volume-force oscillator
  33. 1999On-balance volume confirmation, price-indicator divergence, and bounded exits
  34. 2000A daily long-only confirmation stack on the tether line
  35. 2000A three-filter tether and volume trend system
  36. 2003Constructing finite volume elements as a finite-period money-flow filter
  37. 2003Constructing on-balance volume from signed session volume
  38. 2003On-balance volume as a market-breadth participation ledger
  39. 2003Construct a volatility-adjusted on-balance volume filter before confirming a breakout
  40. 2004Opening and midday ranges as an on-balance-volume breakout case
  41. 2004Constructing a volatility-gated volume-flow measure
  42. 2004Constructing a volume-flow series from on-balance volume
  43. 2004Volume-flow indicator construction from on-balance volume
  44. 2004Volume-flow slope divergence, then separate on-balance-volume and crossover rules
  45. 2004Volume flow and band construction as one inspectable problem
  46. 2004Auditing advance-decline confirmation for scale, horizon, and composition
  47. 2005Bounded market breadth from the Arms index to BRIN
  48. 2006Overnight-hold entry and exit construction
  49. 2007Evaluating Volume-price confirmation versus On-balance volume and MACD
  50. 2009Volume confirmation versus a price advance
  51. 2010Typeahead retrieval of a moving average, on-balance volume, and a stochastic oscillator
  52. 2010Modified volume-price trend and log-price scale alignment
  53. 2010Constructing liquidity accelerometers from advance-decline averages
  54. 2012Failed short cycles as breadth and volume tests
  55. 2016Earnings straddles, implied volatility, and money-flow filters
  56. 2017A volume residual filter and a price projection matrix
  57. 2019Volume-volatility parabola and signed-volume momentum
  58. 2019Separating on-balance volume into breadth and volume
  59. 2020Constructing the obvm signal line
  60. 2020Constructing smoothed on-balance volume with a signal line
  61. 2020Keep neutrality as a first-class input in three-state market data
By fieldMarket breadth135 readingsBy year2003164 readings
All 88 readings tagged On-balance volume
Also on On-balance volume5 readings
1988Combining weekly and daily MACD divergences with on-balance volume1988Constructing volume-confirmation overlays on OHLC spreadsheet charts1988Cumulative volume trend and 200-session polarity1988Payoff index checkpoints for open interest and divergence1988Restoring the original tests for market breadth, on-balance volume, and trendlines