On-Balance Volume - OBV Indicator

On Balance Volume Definition

On-Balance Volume (OBV) is a cumulative volume-based tool intended to show the relation between the amount of deals and asset’s price movements.

How to Use On Balance Volume

The On-Balance Volume line is used for trend confirmation or possible turning points identification purposes.
Trend confirmation:

• An uptrend in prices is confirmed if the line is rising;
• A downtrend in prices is confirmed if the line is falling.

Divergence pattern analysis:

• Rising OBV line along with decreasing prices indicates the downtrend may be weakening to a bullish reversal;
• Falling OBV along with rising prices indicates the uptrend may be weakening to a bearish reversal.

On-Balance Volume (OBV) Indicator

On-Balance Volume Formula (Calculation)

OBV(t) = OBV(t-1) + Vol, if C(t) > C(t-1);
OBV(t) = OBV(t-1) – Vol, if C(t) < C(t-1);
OBV(t) = OBV(t-1), if C(t) = C(t-1),
where:
t – current period;
t-1 – previous period;
C – close price;
Vol – volume.

How to use in trading platform

Use the indicator in action, download one of the trading platforms offered by IFC Markets

Download

Download

See how to use in NetTradeX trading platform, watch the video.

For more information how to set the indicator in the terminal please click here.

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