On-Balance Volume (OBV): How to Use This Trading Indicator in 2025

Most Australian investors know the value of watching price charts, but far fewer leverage the real power of volume indicators. Among these, On-Balance Volume (OBV) stands out as a surprisingly effective—and often overlooked—tool that can help you cut through the market noise. In 2025, as global uncertainty and algorithmic trading shape the ASX, OBV offers retail investors a data-driven edge that’s easy to understand and apply.

What Is On-Balance Volume and Why Should You Care?

On-Balance Volume is a technical analysis indicator that connects volume with price movement. First developed by Joseph Granville in the 1960s, OBV is calculated by adding a day’s volume to a running total when the price closes higher, or subtracting it when the price closes lower. The result? A single line that tracks the cumulative flow of volume in or out of a security.

• OBV rises when volume surges on up-days, signalling buyers are in control.
• OBV falls when volume spikes on down-days, suggesting sellers are dominating.

While OBV doesn’t predict price, it often reveals whether ‘smart money’ is quietly accumulating or distributing shares before a major move. In volatile markets, this insight can be invaluable for timing entry and exit points.

How Australian Investors Are Using OBV in 2025

The Australian market in 2025 is more data-driven than ever. With the ASX seeing increased retail participation and advanced trading platforms now offering OBV as a built-in feature, there’s no excuse to ignore this indicator. Here’s how OBV is being used:

• Spotting Divergences: If the ASX 200 is making new highs but OBV isn’t, it may signal a looming reversal. This has been especially relevant in 2025’s resource and tech rallies, where price surges haven’t always matched volume flows.
• Confirming Breakouts: Traders use OBV to confirm whether a breakout is ‘real’. For example, when Fortescue Metals (FMG) broke resistance in March 2025, a rising OBV suggested strong institutional buying, giving investors extra confidence to ride the trend.
• Filtering False Signals: The influx of algorithmic trading has made price ‘fakeouts’ more common. OBV helps distinguish between genuine and artificial moves by focusing on volume, not just price action.

What’s New: OBV and Market Regulation in 2025

Recent ASIC guidance and market infrastructure upgrades have made volume data more reliable and accessible for retail traders. In 2025, the rollout of T+1 settlement for ASX equities and improved transparency around off-market block trades mean OBV signals are fresher and less prone to distortion. This is crucial for day and swing traders who rely on timely volume analysis.

Key 2025 updates impacting OBV users include:

• Real-time Volume Reporting: ASX now delivers intraday volume updates, making OBV calculations more responsive to fast-moving events.
• Enhanced Charting Tools: Most Australian brokers have upgraded their platforms to offer OBV overlays and automated alerts, lowering the barrier for new users.
• Data Integrity Rules: Stricter ASIC rules on trade reporting have reduced the ‘noise’ from dark pools and high-frequency trades, making OBV a cleaner signal for long-term investors.

Putting OBV to Work: Practical Tips for Australian Investors

Ready to add OBV to your toolkit? Here are some practical ways to use it on the ASX and beyond:

• Combine OBV with Moving Averages: Use OBV alongside a 50- or 200-day moving average to confirm trends. A rising OBV above its average can indicate momentum is building.
• Watch for Divergences: If a stock’s price is falling but OBV is rising, accumulation may be occurring—potentially a bullish sign.
• Set Alerts: Many platforms allow you to set OBV-based alerts, so you’re notified when the indicator crosses key thresholds or diverges from price.

For example, in April 2025, Afterpay’s OBV broke out ahead of its share price surge following a positive earnings surprise. Investors who were tracking OBV had a valuable early warning that institutional buyers were moving in.

Conclusion

On-Balance Volume might not grab headlines, but in the fast-evolving world of Australian equities, it offers a reliable way to track real market sentiment. Whether you’re a day trader, a long-term investor, or somewhere in between, OBV deserves a place in your charting arsenal this year. As trading technology and market transparency improve, expect OBV’s relevance—and your ability to use it effectively—to only grow.