19/10/ · The OBV stands for On Balance Volume – a technical indicator that measures trading volume relative to the price change. Differently put, it allows one to check if the price movement corresponds to the buying or selling pressure or what trading volume corresponds to the price blogger.comted Reading Time: 8 mins 16/05/ · The Forex Geek. The on balance volume (OBV) indicator was created in by Joe Granville for use in the stock markets and became popular amongst professional traders. The on balance volume is primarily a trend indicator that is calculated according to the volume of blogger.comted Reading Time: 5 mins 20/04/ · The On Balance Volume Indicator is regarded by the industry as one of the most popular momentum indicators, and is best used to detect new trade opportunities in the following ways: Trend line strategy. Trend reversal – divergence. Forex trend strategy. I discuss each of these in more detail in the following blogger.comted Reading Time: 8 mins
On-Balance Volume - Explanation and Interpretation - Forex Strategy
This article is a step by step guide to the On Balance Volume indicator. You will learn what is obv, how to use the obv indicator, on balance volume in forex trading, how to custom the obv settings and interpret the signals to buy and sell.
The OBV indicator is a technical tool used to anticipate the price moves based on the trading volumes. The on-balance volume is quite simple and user-friendly. This indicator was originally designed for work in the stock market, later it has been successful used by Forex traders.
The creator of this indicator believed that the main driving force in the market is the volume. The OBV indicator is efficient in trading almost all Forex instruments. Traders can employ the OBV indicator in the analysis of stock charts, futures, and cryptocurrencies. The OBV is also well-combined with other technical tools.
On balance volume in forex trading will cover all the aspects of trading with the OBV in this review.
The On Balance Volume indicator measures the volume changes to make price predictions. It is based on the theory that a significant price movement always follows a sharp change in the trading volume. For example, when large traders invest in an asset, the trade volume increases. The asset price will also rise some time later. You can read detailed instructions on adding indicators to the MT4 charts in the article Bollinger Bands Indicator in Forex Explained.
The On Balance Volume is displayed at the bottom of the chart. The OBV line goes up when the price grows and goes down when the price falls. A sharp move of the indicator suggests big traders are stepping into the market. A smooth movement indicates that other traders are entering the market. I offer a brief description of the On Balance Volume so that you can understand how the obv works. The On-Balance Volume OBV indicator is the best in trading markets.
In this case, it spots the pivot points or the trend continuation signals. The OBV indicator on balance volume in forex trading well in the short-term timeframes. The reason is the natural volatility that may affect the indicator signals.
The history of the Balanced Volume indicator goes back to the s. Instock analysts Woods and Vignola developed a technique, called initially "continuous volume"that became the On Balance Volume prototype.
Later on, the On-Balance Volume indicator was developed by a prominent financial analyst, Joseph E. Granville believed the trade volume to be the main driver of the financial markets. He popularized the OBV technique in his book New Key to Stock Market Profits. Granville compared the trade volume to the steam that is driving the market engine.
Later on, the OBV tool was more and more widely used. The Forex OBV indicator appeared with the popularization of currency trading. It has become so popular among forex analysts that it is now included in the standard list of technical analysis tools, on balance volume in forex trading. It does not show overbought and oversold levels like many oscillators and its absolute value does not matter here.
Besides, all the above signals do not contradict each other, they often appear all at once, on balance volume in forex trading, which could serve as additional confirmation. The above chart is an example of how the OBV signals work together. The purple line marks a common bearish divergence. At the reversal point, there is a strong indicator momentum.
I marked it with the red arrow. This signal means strong selling pressure, which confirms that the uptrend should soon turn down. Amid this sharp price movement, the chart breaks out the red line in the OBV window. So, there is another bearish signal, on balance volume in forex trading. Along with the entire on balance volume in forex trading move, starting from the very beginning of the price fall, the indicator is following the price chart, confirming the bear trend continuation, on balance volume in forex trading.
I marked it with the blue arrow. You don't have to look for the OBV indicator MT4 download on the Internet. The On-Balance Volume indicator is among standard technical tools available on most trading platforms. So, the OBV must already be in your trading terminal.
Next, you will see the settings window. The Parameters section is elementary. You can set the price chart, which the indicator formula is applied to Open, Close, and so onset the line color, and add highs and lows.
Default settings will suit will, so you do not have to change anything. To confirm the settings, press the OK button at the bottom of the chart. I shall briefly describe how the OBV indicator formula is calculated. The on balance volume formula is as follows.
The price continues growing today, and the volume is points. It is not on balance volume in forex trading to calculate On Balance Volume manually. To make the OBV formula as clear as possible, I prepared a calculation model in Excel. You can download the Balance Volume OBV Indicator Excel Sheet here. If you have problems with the OBV excel sheet, refer to the step-by-step guide in the Bollinger Bands Excel section in the article Bollinger Bands Indicator in Forex Explained.
You enter the values in the corresponding pink columns over the needed period — the closing price and the trade volume. The values written in the pink columns are just an example. You should delete them when you work with the excel sheet. If you do not know the volume level, you can find it out using a common tool Volume, on balance volume in forex trading. You enter the values for each bar separately. The table contains a formula for 25 bars. If you need to carry out the analysis over a longer period, just stretch the table below.
On the right side of the table, there are the price and the on-balance volume charts. They will be recalculated automatically after you enter new values into the table. With the help of these charts, you will be able to carry out the same analysis as in the trading terminal. On balance volume is a momentum indicator. It considers only the movements up or down. An essential analysis element is a comparison of the On Balance Volume line movements and the price changes. I presented examples of such analysis above.
Divergences are quite common signals. Divergence occurs when the indicator and the price chart co in opposite directions. There can be bullish and bearish divergence. I covered the divergence signals in detail in the article Divergence and Convergence in Forex. The OBV divergence works in the same way as with other technical tools. Purple lines in the above chart mark divergence. Note that the price chart indicates a downtrend while the on balance volume line starts rising gradually.
Finally, the trend reverses, and a bullish trend starts red line. A bear divergence occurs in the opposite situation. The price chart rises, the obv line goes down. An alternative is the sideways movement of the OBV in a bull trend. In both cases, the signal means a soon price reversal, and a bearish trend starts. The chart schematically displays a bearish divergence purple lines. The price chart goes up while the on balance volumes are gradually declining.
Later, the trend turns down red line. There is a special technical tool designed to spot divergences on balance volume in forex trading. It is TrueT OBV Divergence Indicator. The TrueT OBV Divergence analyzes the last visible bars and paints diverging lines in the On Balance Volume window. A great benefit of this tool is the alert signaling divergence and many additional settings compared to the classical version.
In trading with the trend, it is important to understand if the ongoing trend is exhausting or it will continue. Here, we can use the OBV trend confirmation signal. When the bullish trend is developing, the OBV indicator hits higher highs. The same is in the opposite situation. The bear trend is confirmed when the obv lows are getting lower.
The green line in the above chart marks a on balance volume in forex trading trend. The OBV line also demonstrates an uptrend.
On Balance Volume Indicator Explained: Best OBV Trading Strategy (Forex)
, time: 8:17On Balance Volume (OBV): Ultimate Guide of Using OBV Indicator in Forex Trading | LiteForex
19/10/ · The OBV stands for On Balance Volume – a technical indicator that measures trading volume relative to the price change. Differently put, it allows one to check if the price movement corresponds to the buying or selling pressure or what trading volume corresponds to the price blogger.comted Reading Time: 8 mins 20/04/ · The On Balance Volume Indicator is regarded by the industry as one of the most popular momentum indicators, and is best used to detect new trade opportunities in the following ways: Trend line strategy. Trend reversal – divergence. Forex trend strategy. I discuss each of these in more detail in the following blogger.comted Reading Time: 8 mins 15/10/ · On Balance Volume Trading Strategy. On-balance volume is a technical analysis indicator intended to relate price and volume in the market. OBV is based on a cumulative total volume. I was using this indicator for my personal trading over long time and its a very effective indicator. then i came across through a blog where i found this strategy
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