Guide · Volume & money flow
Does On-Balance Volume work?
Across 375 stocks, On-Balance Volume cut the worst fall on 73%, beat buying and holding on risk-adjusted return on 16% and on raw return on 17%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
A running total of volume: add it on up days, subtract it on down days. Rising OBV says buyers are accumulating.
- In when OBV is above its 20-day average.
- Out when it is below.
Volume & money flow plays bet that volume shows conviction. The family guide
How to use it
- It trades often (about 33 switches a year per stock), so costs, spreads and taxes eat into it more than the backtest's 0.05% per switch suggests.
- Expect to be wrong more often than right: only 27% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Industrials & rentals (33% beat holding on risk-adjusted return) and worst on Micro caps (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
On-Balance Volume did best against holding in the COVID drop (+21% median gap) and worst in the 2020–21 rally (−28%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| On-Balance Volume | +10% | −11% | +21% | −28% | +6% | −12% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Industrials & rentals | 33% | -0.21 |
| Real estate | 26% | -0.21 |
| Financials | 23% | -0.16 |
| Software & devices | 18% | -0.31 |
| Industrials & materials | 18% | -0.24 |
| Healthcare | 17% | -0.30 |
| Energy & power | 15% | -0.25 |
| Indexes & ETFs | 14% | -0.41 |
| Consumer & retail | 12% | -0.26 |
| Metals & mining | 12% | -0.22 |
| Media & telecom | 10% | -0.16 |
| Semiconductors | 9% | -0.34 |
| Sectors | 0% | -0.37 |
| Big tech | 0% | -0.32 |
| Micro caps | 0% | -0.56 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
On-Balance Volume holds 188 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.