Volume indicators: OBV, MFI and money flow

Trading volume shows how much participation stands behind a price move. A move on heavy volume is generally taken more seriously than one on thin volume. Volume indicators try to present that participation in a more readable form. Before using them, though, you need to know what the volume figure on your chart actually represents.

OBV: cumulative volume

On-Balance Volume is a running total: if today's close is higher than yesterday's, today's volume is added; if it is lower, it is subtracted. The absolute value of OBV is meaningless; what matters is its direction. If price is stuck in a range while OBV climbs, some traders read it as accumulation. Divergence between OBV and price can also warn that a move is losing support.

MFI and money flow measures

The Money Flow Index can be thought of as a volume-weighted RSI. It multiplies the typical price (the average of high, low and close) by volume and compares positive and negative money flow over a period. It ranges from 0 to 100, with 80 and 20 commonly used as overbought and oversold boundaries.

Chaikin Money Flow looks at where each close falls within the candle's range and weights that by volume. Persistent positive readings point to buying pressure, persistent negative readings to selling pressure.

An important caveat for crypto and forex

In equities, volume usually comes from a central exchange. The markets we focus on are different:

• Forex: the market is decentralised and total volume is not available. Platforms usually show "tick volume", the number of price changes at that broker, not the actual amount of money traded.
• Crypto: trading is spread across many exchanges, so each exchange's volume is only part of the picture. Some exchanges have also been accused of reporting inflated volume in the past.
• Global gold: much of the trading happens over the counter, so volume on spot charts is incomplete as well.

In these markets, use volume indicators mainly for relative comparison within the same data source, not as a precise measure of whole-market participation.

Key takeaways

• Volume reflects the participation behind a price move.
• With OBV, the direction of the line matters, not its value.
• MFI combines price and volume on a 0–100 scale.
• Volume in forex, crypto and spot gold is incomplete or source-dependent.