Start Smart TA Series - Lesson 34: OBV Indicator In Crypto, On Balance Volume And Divergence Explained

Key Points

• OBV, or On Balance Volume, is a cumulative volume indicator that tracks whether volume is flowing into up closes or down closes.
• OBV indicator crypto is mainly used for trend confirmation… it helps you judge whether volume supports the price move.
• How to use OBV: compare OBV direction to price direction. If both trend together, the move has stronger volume support.
• OBV divergence crypto explained: if price makes a new high but OBV does not, or price makes a new low but OBV does not, it can signal weakening participation.
• OBV vs volume indicator difference: volume bars show activity per candle, while OBV compresses volume into a single cumulative line to reveal longer-term pressure.
• OBV works best when you anchor it to higher timeframe levels and trends, not when you react to every wiggle.
• If any terms feel unfamiliar, use the Crypto Glossary for quick definitions, then return to this lesson.
• This lesson is part of the Technical Analysis for Beginners series… for the full lesson map and supporting guides, visit the Technical Analysis for Beginners Hub.

Quick Answer

OBV (On Balance Volume) is a cumulative volume indicator that adds volume on up days and subtracts volume on down days, creating a running line that reflects buying and selling pressure over time. In crypto, traders use the OBV indicator to confirm trends and spot divergence. If price is rising and OBV is also rising, volume is supporting the move. If price makes new highs while OBV fails to confirm, that OBV divergence can signal weakening participation. OBV is useful because it simplifies volume into a trend line, making it easier to judge whether the market is being pushed by real volume or drifting without strong support.

Where This Lesson Fits

Lesson 33 introduced ADX and showed how to measure trend strength and avoid choppy conditions. Lesson 34 adds a complementary tool… OBV, which helps you judge whether volume is confirming the trend.

What Is OBV?

OBV stands for On Balance Volume.

It turns volume into a running total.

The calculation is simple:

• if the candle closes higher, OBV adds that candle’s volume
• if the candle closes lower, OBV subtracts that candle’s volume

Over time, the OBV line rises when volume is consistently happening on up closes, and falls when volume is consistently happening on down closes.

Why OBV Can Be Useful In Crypto

Crypto can move fast, and volume can be messy.

OBV helps you focus on the bigger question:

Is volume supporting this direction… or not?

That reaction can come from:

• buyers stepping in repeatedly on up closes
• sellers dominating the closes even if price still chops sideways
• price grinding higher with weak participation, which OBV can expose

OBV does not predict the future. It gives you evidence about participation.

How To Use OBV

The simplest way to use OBV is to compare its trend with price.

1) OBV As Trend Confirmation

If price is making higher highs and higher lows, and OBV is also rising, the trend has volume support.

If price is trending down and OBV is falling, the downtrend has volume support.

This is the cleanest use case.

2) OBV Divergence Crypto Explained

Divergence is when OBV and price disagree.

Common divergence examples are:

• price makes a new high, OBV does not… participation is not confirming
• price makes a new low, OBV does not… selling pressure may be weakening

Divergence is not a trade trigger. It is a warning sign.

You still need price confirmation, such as a level break or a failed retest, to treat it as meaningful.

3) OBV Breakouts

OBV can sometimes break a trendline or prior OBV high before price does.

That can hint that volume is building early.

Mark:

• OBV trendline breaks
• OBV pushing into new highs while price is still below resistance

This is subtle, but it can add confidence when paired with your level work.

OBV Vs Volume Indicator Difference

Volume bars are candle-by-candle.

They show you how active each candle was.

OBV compresses those bars into one running line.

OBV vs volume indicator difference:

• volume bars show spikes and drops per candle
• OBV shows whether volume is consistently supporting one direction over time
• volume bars are great for short-term confirmation
• OBV is great for trend confirmation and divergence reads

They are not competitors. They answer different questions.

How To Read OBV With Price Trend Confirmation

Use a basic three-step check.

Step 1: identify the price trend and key levels.
Step 2: check whether OBV is trending in the same direction.
Step 3: if they disagree, treat it as a caution flag, then wait for price confirmation at levels.

This keeps you from overreacting to one divergence line on a noisy chart.

Common Traps To Avoid

• treating OBV divergence as an automatic reversal signal
• ignoring that OBV can look different across exchanges and pairs
• switching timeframes until OBV tells the story you want
• using OBV without levels, trend context, and confirmation
• expecting OBV to work perfectly in very low-liquidity markets

OBV is best used on liquid charts where volume data is meaningful.

Mini FAQs

What is OBV in crypto?
OBV is a cumulative volume indicator that adds volume on up closes and subtracts volume on down closes to show buying and selling pressure over time.

How do you use OBV indicator in crypto?
Use OBV to confirm trends and identify divergence. Rising OBV with rising price supports the trend, while disagreement can warn participation is weakening.

What is OBV divergence in crypto?
OBV divergence is when price makes a new high or low but OBV fails to confirm, suggesting volume participation may be weakening.

How do you read OBV with price trend confirmation?
Compare price trend direction with OBV direction, then look for confirmation at key support and resistance levels when they disagree.

What is OBV vs volume indicator difference?
Volume bars show activity per candle. OBV turns volume into a cumulative line to highlight longer-term directional pressure.

Is OBV good for beginners?
Yes, because it simplifies volume into a trend line and helps beginners stop relying on price alone.

Next Lesson

In this lesson you learned what OBV is, how the OBV indicator works in crypto, how to use OBV for trend confirmation, and how OBV divergence can warn that participation is weakening.

Next, Lesson 35 covers combining indicators, showing you how to build a small toolkit where each indicator has a job, rather than stacking ten indicators that all measure the same thing.

For the full lesson map and all supporting guides, visit the Technical Analysis for Beginners Hub.

If this lesson helped you stop trusting price alone and start checking whether volume backs the move, Alpha Insider is where these tools are applied inside a consistent TA process across BTC, ETH, and top altcoins.

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Price plus volume… or nothing.

Legal And Risk Notice

This content is for education and information only and should not be considered financial, legal, or tax advice. Crypto assets are volatile and high risk. You are responsible for your own research and decisions, and you should consider seeking independent professional advice where appropriate.