Both indicators answer one question: is volume flowing with price or against it? The actual number on the OBV or PVT line does not matter. Only its direction, and how that direction compares with price, does.
On-Balance Volume (OBV)
OBV is the simplest running total of volume. For every candle:
Close higher than the previous close: add the candle's volumeClose lower than the previous close: subtract the candle's volumeClose unchanged: OBV stays the same
OBV does not care how far price moved, only in which direction. A candle that closes 1 point higher on 6 lakh volume adds the full 6 lakh.
Price Volume Trend (PVT)
PVT fixes that blind spot. It adds or subtracts only the part of the volume that matches the size of the price move.
PVT = previous PVT + volume × (close − previous close) ÷ previous close
A big move on big volume changes PVT a lot. A tiny move on big volume barely changes it.
OBV and PVT side by side
Three sample candles show the difference clearly.
| Close | Change | Volume | OBV adds | PVT adds |
|---|---|---|---|---|
| 25,000 | Start | |||
| 25,050 | +0.20% | 5L | +5L | +0.0100L |
| 25,040 | −0.04% | 6L | −6L | −0.0024L |
| 25,140 | +0.40% | 4L | +4L | +0.0160L |
Look at the middle candle. Price slipped only 10 points, but OBV subtracted the full 6 lakh, more than the first candle added. PVT treated it as the small dip it was. After three candles, OBV is up 3L and PVT is clearly positive; both say flow is up, but PVT tells the story more fairly.
OBV reacts sharply and is good at spotting the moment heavy volume flips sides. PVT is smoother and better at showing whether a trend is being supported steadily. Many traders watch both: when they agree, the read is stronger.
Confirmation and divergence
- Up
- Down
- OBV
- PVT
- Confirmation. On the breakout candle price jumps out of the range and OBV jumps with it. PVT turns up too. Volume is flowing with the move.
- Swing high. Price makes a high for the afternoon. OBV makes a high at the same time.
- Divergence. About nine candles later, price pushes slightly above that high. OBV and PVT do not; they stay below their earlier peak. The new high came without new volume behind it.
Confirmation
Price makes a higher high and OBV or PVT also makes a higher high. Volume is supporting the trend. This does not predict how far the move will go, but it tells you the trend is not running on empty.
Bearish divergence
Price makes a higher high, but OBV or PVT makes a lower high. Fewer participants are buying at the new high. It is an early warning, often seen near the end of a move. It is not a sell signal on its own: wait for price to confirm, for example by breaking the last higher low.
Bullish divergence
Price makes a lower low, but OBV or PVT makes a higher low. Selling is drying up even as price slips. Again, wait for price to confirm by reclaiming a level or breaking a lower high.
Rules for reading them
- Compare swing points, not single candles. Mark the last two highs (or lows) on price, then check the same two points on OBV and PVT.
- Ignore the level, read the slope. A running total depends on where it started, which is simply the first candle loaded on your chart. So the value itself carries no meaning; the direction does.
- Price confirms, the indicator warns. A divergence is a reason to tighten your plan, not a reason to enter against the trend.
- Check against volume bars. If OBV jumps, find the tall volume bar that caused it. One giant candle can move OBV a lot.
Checklist
- OBV adds or subtracts the whole volume by direction. PVT weights it by the size of the move.
- Read OBV and PVT by their slope and swing points, never by their value.
- Higher high on price with a higher high on OBV/PVT: confirmed.
- Higher high on price with a lower high on OBV/PVT: divergence. Wait for price to confirm.