OBV, developed by Joseph Granville, is a volume indicator measuring buying and selling pressure by cumulating volume. OBV is based on the theory that volume precedes price movement; analyzing volume changes can predict price trends.
If today's close > yesterday's close: OBV = Yesterday's OBV + Today's volume If today's close < yesterday's close: OBV = Yesterday's OBV - Today's volume If today's close = yesterday's close: OBV = Yesterday's OBV Initial OBV typically set to 0 or first day's volume
Standard OBV: Cumulative volume, shows absolute value
OBV Moving Average: Applies moving average to OBV, smooths fluctuations
OBV Percentage: Percentage change in OBV, facilitates comparison across assets
OBV Divergence: Price and OBV move in opposite directions, signals trend reversal
Rising OBV: Increasing buying pressure, bullish signal
Falling OBV: Increasing selling pressure, bearish signal
OBV Confirms Price: Confirms current trend
Bearish Divergence: Price makes new high but OBV doesn't, signals weakening upward momentum, possible decline
Bullish Divergence: Price makes new low but OBV doesn't, signals weakening downward momentum, possible rise
OBV Breakout: OBV breaks previous high or low, signals price may follow breakout
OBV Trendline: Drawing trendlines on OBV, breakout signals trend change
OBV is best used for confirming price trends and identifying divergences. In uptrends, OBV should rise in sync; if price rises but OBV falls or moves sideways, uptrend lacks volume support and may be false breakout. OBV divergence is one of the most powerful signals, especially when occurring near key support/resistance. Many traders apply moving averages or trendlines to OBV for clearer trend change identification.
Combines price and volume analysis, strong divergence prediction capability, can provide early warning of trend changes, simple and intuitive, applicable to all markets with volume data
Not applicable to forex markets (no centralized volume data), absolute value meaningless need to watch trend, weaker signals in low volume markets, requires analysis with price action
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