OBV vs Anchored VWAP
On-balance volume adds a bar's entire volume when the close is up and subtracts it when the close is down, producing a cumulative line whose units are volume. Anchored VWAP averages price weighted by volume from a chosen starting point, producing an actual price level.
Both of these are described as volume indicators and they produce completely different kinds of output. One gives you a running tally measured in shares or contracts; the other gives you a price. That is not a detail — it decides whether the tool can be used in an order.
What each one is
On-balance volume adds a bar’s whole volume when the close is higher than the previous close and subtracts all of it when the close is lower. The result is a cumulative line. The OBV indicator covers it.
Anchored volume-weighted average price averages price weighted by volume, starting from a point you choose. Anchored VWAP covers it, and VWAP covers the session-based version.
One is measured in volume and one in price. Whereas the anchored average sits on the chart at a level you can rest an order against, on-balance volume lives in a separate panel with units that have no relationship to price at all.
Where they differ
Whether the output is actionable. The anchored average is a price. You can buy at it, place a stop beyond it, and measure risk from it. On-balance volume’s value is a cumulative total whose absolute figure depends entirely on when the calculation started.
How crudely each treats a bar. On-balance volume assigns the entire bar’s volume to one side based solely on whether the close was up or down, so a bar that rose a tenth of a point and one that rose two points count identically. The anchored average weights every price by the volume that actually traded there.
Where the judgment sits. On-balance volume has no settings and no decisions — it is fully determined by the data. The anchored average requires you to pick a starting point, and a different anchor produces a completely different line, which is both its flexibility and its main weakness.
What each is claiming. On-balance volume claims volume leads price, which is a strong claim with mixed support. The anchored average claims only that a volume-weighted average since an event is a level participants care about — a much narrower and more defensible statement.
Where they agree
Both need trustworthy volume. Neither works on spot foreign exchange, where there is no consolidated tape and the figure is one broker’s flow.
Both are backward-looking, and neither leads price in any sense that survives checking.
Both cost a round trip when acted on — a hypothetical 1.5 cents against 75-cent bars is 2% of a bar per entry, and neither the volume tally nor the anchored line reduces it.
And both are ruined by ranges. Sideways trade adds up-day volume and down-day volume in near-equal measure while price keeps returning to its average, which produces a flat tally and an anchored level price crosses repeatedly.
Which one to use: OBV or Anchored VWAP?
Use anchored volume-weighted average price when you need a level. Anchored to an earnings release, a gap, a swing low or the start of a move, it gives you the average price everyone who traded since that event has paid — which is a genuinely meaningful number and one you can act at.
Use on-balance volume when the question is whether participation supports the move. A price rising while the tally is flat says the buying is thin, and that is information no price-only tool provides.
Use both, since they do not overlap. One supplies context about participation and the other supplies a price, which is a real division rather than two versions of the same reading.
And when your instrument has no reliable volume, use neither. Both are built on a number that must be real, and there is no version of either that degrades gracefully when it is not.
Why the anchor is the whole tool
Because the level is a statement about a specific population of trades. Anchored to a gap, it is the average price paid by everyone who has traded since the gap — a group with a shared reference point. Anchored to an arbitrary date it is the average price paid by an arbitrary group, which means nothing.
And because a thin stretch skews both. A handful of trades at an unusual price pulls the weighted average toward it and adds a full bar’s volume to the tally, in neither case reflecting real participation.
The original data
On-balance volume appears in 54 titles at a median of 8,475 views across 42 channels. Anchored volume-weighted average price appears in 29, at a median of 14,972 across 26.
Fewer videos and two-thirds more audience on the anchored average. It is the newer and less-covered of the two and draws substantially more interest per video, which is the signature of an under-served subject rather than a better one.
The two answer different halves of one question. The level says where, and a falling tally says the participation is not there — which is exactly the combination that makes running both worthwhile.
How the videos on each are made
OBV videos are the shorter of the two, at a median of 8 minutes against 9.8 for anchored VWAP, roughly 1.7 minutes less. Of the anchored VWAP videos, 72% remain under 50,000 views, against 87% of the OBV videos. Titles shaped as a lesson, meaning how to, tutorial, explained and the like, account for 52% of the anchored VWAP set and 43% of the OBV set.
When it fails
The characteristic failure is treating on-balance volume’s absolute value as meaningful. The line is a cumulative sum from whenever the calculation began, so its level depends on the chart’s start date rather than on anything about the market. People draw trendlines on it, mark support and resistance on it, and compare its value between instruments — all of which are operations on a number that would be entirely different if the chart loaded one more year of history. Only the direction and the divergence from price carry information, and everything else is an artifact of where the sum started.
A second failure is anchoring the weighted average to an arbitrary date. The level only means something if the starting point does.
A third is using either on spot foreign exchange, where the volume figure is one venue’s.
A fourth is reading a divergence as a forecast, when most resolve by the indicator catching up.
And a fifth is signing a bar’s whole volume by a close that barely moved, which is on-balance volume’s construction and the reason it is noisy in a range.
Related
The OBV indicator covers the cumulative volume tally. Anchored VWAP covers the level and the anchor choice. And VWAP covers the session-based version of the same average.
Anchored volume-weighted average price is the rare volume tool that outputs a price, which is why it survives contact with an order ticket. On-balance volume outputs a running total of volume, and no amount of staring at it produces a level to act at.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.