Skip to main content
Track On-balance volume
38 / 61
Search the archiveLibrary
Library

2003issue C081

On-balance volume as a market-breadth participation ledger

On-balance volume keeps a signed running total of up-volume and down-volume. The historical workflow treats the market as aligned when that ledger tracks price, and treats a later split as a possible early sign that the swing is changing character.

  • On-balance volume adds a session's volume on a higher close, subtracts it on a lower close, and holds steady on an unchanged close.
  • An aligned-market is the condition in which the cumulative volume total tracks price, taken as a sign that participation matches the visible trend.
  • A volume-price-divergence is a split in direction or pace between price and the ledger, used as a warning that the current swing may be changing.
  • Editorial reading: first confirm that price and the ledger move together, then treat a later split as a falsifiable hypothesis that the swing is changing character.
Entries in this reading2 entries
Current trackOn-balance volume88 readingsVolume-price analysis207 readings

How the running total is classified

On-balance volume is a cumulative volume series. It adds the current session's volume when the close is higher than the prior close, subtracts that volume when the close is lower than the prior close, and is left unchanged when the close matches the prior close.

The indicator is maintained as a running total of sessions classified as up-volume or down-volume. Up-volume is session volume treated as positive because the close is higher than the prior close. Down-volume is session volume treated as negative because the close is lower than the prior close.

Reading price with the signed total

Volume-price analysis reads price direction together with the signed volume total to judge whether participation confirms or disputes the visible move.

When price and the cumulative volume total move in step, the market is described as aligned and healthy. That state is an aligned-market: a condition in which the cumulative volume total tracks price, taken as a sign that participation matches the visible trend.

Splits as a change-of-character warning

A split between the cumulative volume total and price is treated as a possible early sign that price behavior may change, including from advance to decline or from sideways to trending.

That split is a volume-price-divergence: a difference in direction or pace between price and the cumulative volume total, used as a warning that the current swing may be changing. Some analysts overlay the cumulative volume total on the price series so those splits are easier to inspect.

A June case of a shared breakout

A case in which both a major industrial average and its on-balance volume broke out together in June is used to illustrate near-term participation supporting the advance.

Dow Jones daily on-balance volume into the June 2003 breakout

The winter selloff drives the signed volume total down with price, the March low turns the ledger up, and in June that running total clears the rising line drawn on the source plot as the Dow prints 9318.96. That joint thrust is the in-gear, shared-breakout case the column is teaching. Levels are read from the daily $INDU chart printed with the piece; −13,081,843 is the last on-balance-volume figure written on the scale, and earlier points are digitized from the curve against the printed ticks.
The winter selloff drives the signed volume total down with price, the March low turns the ledger up, and in June that running total clears the rising line drawn on the source plot as the Dow prints 9318.96. That joint thrust is the in-gear, shared-breakout case the column is teaching. Levels are read from the daily $INDU chart printed with the piece; −13,081,843 is the last on-balance-volume figure written on the scale, and earlier points are digitized from the curve against the printed ticks.$INDU · Daily · 2003-01-01T00:00:00.000Z to 2003-06-30T00:00:00.000Z

Granville’s rule on the source plot is unchanged: add the session’s volume after an up close, subtract it after a down close, leave it unchanged on a flat close. Sample dates follow the month ticks (03, F, M, A, M, J) and are weekly approximations, not a printed session calendar. Intermediate levels are read to the nearest half-million; only the final print is exact.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
38 of 61 in the On-balance volume track
20031-17 pp.Next on On-balance volumeConstruct a volatility-adjusted on-balance volume filter before confirming a breakoutTypical price, the average of high, low, and close, is the reference for locating the close in the bar and for measuring change from the prior bar.
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
1988Constructing volume-confirmation overlays on OHLC spreadsheet charts1988Cumulative volume trend and 200-session polarity1988Signing volume by open interest change1988Three clocks when cumulative volume led price1989Constructing a volume percentage ratio from advance-decline flow