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What Is On-Balance Volume

On-balance volume is a running total: each day's volume is added if the day closed higher than the day before and taken away if it closed lower, and the line is the total so far. This paper shows you gold's total through 2025 drawn from real closes and volume, the idea as a water tank filled on up days and drained on down days, the line under the daily chart, the arithmetic for the first week of January, and the indicator on your platform, where there is no Period to set and only the slope means anything.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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A running total of volume

On-balance volume is a running total. Each day, if the close is higher than the day before, that day's volume is added to the total; if it is lower, the same volume is taken away. The line under gold's price is that total, counted from zero on 2 January 2025: 3.56 million by 22 April, in the platform's volume units, and 9.31 million by 20 October. The line has no scale of its own, because the total depends on where the counting started. Only its slope means anything.

A water tank

The picture is a water tank. On a day that closes higher than the day before, that day's volume is poured in; on a day that closes lower, the same amount is drained out. A quiet day is a bucket's worth, a busy day a barrel's. On-balance volume is the level in the tank: the sign of each day's pour comes from the close, the amount from the volume, and the level is the running total. It rises while the busy days are closing up and falls while they are closing down.

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