OBV, A/D line and Chaikin Money Flow

What it is

On-balance volume (OBV), from Joe Granville in 1963, adds a bar's volume when it closes up and subtracts it when it closes down, giving a running total. The accumulation/distribution (A/D) line weights each bar's volume by where it closed in its range: a close near the high counts as buying, near the low as selling. Chaikin Money Flow (CMF) is the same idea summed over about 20 bars and divided by their volume, so it moves between −1 and +1.

They only need candles and volume, so they run on any chart. On forex and CFDs that volume is the broker's tick volume, which makes them a proxy for real buying and selling, not a measurement of it.

How to spot it

• OBV and A/D are lines under price; compare their direction with price's.
• CMF above zero means closes have been mostly in the upper part of bars on decent volume; below zero, the opposite.

How to use it

• Use them to confirm a trend: rising price with rising OBV or A/D.
• Watch for divergence at key levels, as with RSI.

Common mistakes

• Treating them as order flow; they're estimates built from candles.
• Reading tiny wiggles; only clear divergences or trends matter.

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