The On Balance Volume is a momentum indicator which makes use of the volume of trade in a currency trading to predict changes in the price action of that currency pair. The indicator was introduced by Joseph Granville and serves as a way of measuring of positive and negative volume flow. The principle behind the workings of the indicator trading that if volume increases obv decreases without a matching increase or decrease in the price of an asset would lead to a divergence situation where price of the asset would eventually have to correct itself to catch up with the volume changes. The On Balance Volume indicator is made up of the OBV indicator line. The On Balance Volume OBV line is plotted by summing up positive and negative volume for the asset. There is no change in Current OBV if the asset closes at the same price level as it did in the previous period. The indicator is listed on the MT4 as a volume indicator. The indicator line of the Money Flow Index indicator can be enhanced by either increasing the line thickness or by changing the colour of the indicator to make it more visible. The On Balance Volume is an indicator which can be used as a standalone indicator through and through. We will demonstrate two ways to use the OBV indicator. As a standalone indicator, the On Balance Volume stands out as a divergence trade indicator. Divergence trades with volume indicators are usually more reliable than other oscillators. This is because the volume measuring component of the indicator leads the price action. The divergence in this obv would be to look to see where the peaks and troughs of price action deviate from the peaks and troughs of the On Balance Volume. Trend lines are used forex connect the peaks and troughs of both price action and the OBV. Whenever a divergence is detected, forex represents a trading opportunity as price action will follow the divergent movement of the OBV indicator. There are two types of divergences: The bullish forex occurs when OBV shows a higher low as prices move show lower low. A bearish divergence occurs when OBV forms lower lows when prices forge higher highs. The example above shows obv typical divergence trade. The OBV is showing lower lows while the price action highs are static. This is a bearish divergence and price is expected to correct downwards obv tally with the OBV. After identifying trading divergence, the trade is setup. The trading point of this trade is when price gets to oversold levels as identified by the OBV. Note that a good technical entry is required for this trade forex play out as expected. The On Balance Volume indicator can be used to initiate a breakout trade. What is done here is that the previous highs or lows of the indicator are connected by a trend line, and then we look for a move forex the indicator line that will break this trend line. When this break occurs, the price action will follow the direction of the indicator breakout. Here we can see that the indicator shows a resistance area and the line breaks this area. The price action eventually mimicked this move and we saw price action head upwards in the manner of an ascending triangle breakout. The divergence trade is the easier of the two strategies to use. Make sure you practice how to trade each setup on a demo account before using the indicator to trade real money. Also pay attention to risk management. Mail will not be published required. You can use these tags: Contact Us Sitemap Affiliate Program Trading in financial instruments carries a high level of risk to your capital with the possibility trading losing more than your initial investment. Trading in financial instruments may not be suitable for all investors, and is only intended for people over Please ensure that you are fully aware of the risks involved and, if necessary, seek independent financial advice. You should also read our learning materials and risk warnings. The website owner shall not be responsible for and disclaims all liability for any loss, liability, damage whether direct, indirect or consequentialpersonal injury or expense of any nature whatsoever which may be suffered by you or any third party including your companyas a result of or which may be attributable, obv or indirectly, to your access and use of the website, any information contained on the website. Related Posts Money Flow Index Indicator Explained Commodity Channel Index CCI Explained Fibonacci Extension Indicator Explained MACD Indicator Explained PSAR Indicator Expained. Leave a Reply Click here to cancel reply. Practice Trading at eToro Now! 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Price Action Trading School: OBV and other momentum indicators (Nov 9, 2016)
Price Action Trading School: OBV and other momentum indicators (Nov 9, 2016)
Planned by the Citizens Committee, the Plessy Case sought out to test the Constitutionality of the Separate Car Act, challenging it violates the Thirteenth and Fourteenth Amendment.
A young man from Minnesota, Nick travels to the West Egg in New York to learn about the bond business.
Planned by the Citizens Committee, the Plessy Case sought out to test the Constitutionality of the Separate Car Act, challenging it violates the Thirteenth and Fourteenth Amendment.
We teach our children not to blindly accept without question.