Comparing relative action between price bars and On-Balance Volume (OBV) generates more actionable signals, and plotting OBV on top of price chart alows to visually emphasis the relation between the price bars and OBV.
The On Balance Volume indicator (OBV) is a good metric for measuring buying and selling pressure. Many people believe that buying and selling pressure precede changes in price, making this indicator valuable. The actual individual quantitative value of OBV is not relevant. Instead, traders and analysts look to the nature of OBV movements over time; the slope of the OBV line carries all of the weight of analysis.
* Trend Identification - On Balance Volume (OBV) is useful for identifying or confirming overall market trends, when both price and OBV are moving in the same direction the underlying trend is likely to continue.
* Devrgence - divergence occurs when price movement is not confirmed by the indicator. In many cases, these divergences can indicate a potential reversal
* During a trading range, if the OBV is rising, accumulation may be taking place—a warning of an upward breakout, and coversly if the OBV is falling, distribution may be taking place—a warning of a downward breakout.
Note of caution in using the On Balance Volume
- It is a leading indicator, meaning that it may produce predictions, but there is little it can say about what has actually happened in terms of the signals it produces. Because of this, it is prone to produce false signals. It can therefore be balanced by lagging indicators. Add a moving average line to the OBV to look for OBV line breakouts; you can confirm a breakout in the price if the OBV indicator makes a concurrent breakout
- A large spike in volume on a single day can throw off the indicator for quite a while. For instance, a surprise earnings announcement, being added or removed from an index, or massive institutional block trades can cause the indicator to spike or plummet, but the spike in volume may not be indicative of a trend
This study additionally presents
- Volume Histogram with a Volume Moving Average
- Volume Weighted Colored Bars
Other alternatives where OBV is used as source of creating indicators : RelativeStrength of VolumeIndicators , Neglected-Volume , StochX Indicator of Indicators , etc
As with most indicators however, it is best to use OBV with additional technical analysis tools
Disclaimer: Trading success is all about following your trading strategy and the indicators should fit within your trading strategy, and not to be traded upon solely
The script is for informational and educational purposes only. Use of the script does not constitutes professional and/or financial advice. You alone the sole responsibility of evaluating the script output and risks associated with the use of the script. In exchange for using the script, you agree not to hold dgtrd TradingView user liable for any possible claim for damages arising from any decision you make based on use of the script
The On Balance Volume indicator (OBV) is a good metric for measuring buying and selling pressure. Many people believe that buying and selling pressure precede changes in price, making this indicator valuable. The actual individual quantitative value of OBV is not relevant. Instead, traders and analysts look to the nature of OBV movements over time; the slope of the OBV line carries all of the weight of analysis.
* Trend Identification - On Balance Volume (OBV) is useful for identifying or confirming overall market trends, when both price and OBV are moving in the same direction the underlying trend is likely to continue.
* Devrgence - divergence occurs when price movement is not confirmed by the indicator. In many cases, these divergences can indicate a potential reversal
* During a trading range, if the OBV is rising, accumulation may be taking place—a warning of an upward breakout, and coversly if the OBV is falling, distribution may be taking place—a warning of a downward breakout.
Note of caution in using the On Balance Volume
- It is a leading indicator, meaning that it may produce predictions, but there is little it can say about what has actually happened in terms of the signals it produces. Because of this, it is prone to produce false signals. It can therefore be balanced by lagging indicators. Add a moving average line to the OBV to look for OBV line breakouts; you can confirm a breakout in the price if the OBV indicator makes a concurrent breakout
- A large spike in volume on a single day can throw off the indicator for quite a while. For instance, a surprise earnings announcement, being added or removed from an index, or massive institutional block trades can cause the indicator to spike or plummet, but the spike in volume may not be indicative of a trend
This study additionally presents
- Volume Histogram with a Volume Moving Average
- Volume Weighted Colored Bars
Other alternatives where OBV is used as source of creating indicators : RelativeStrength of VolumeIndicators , Neglected-Volume , StochX Indicator of Indicators , etc
As with most indicators however, it is best to use OBV with additional technical analysis tools
Disclaimer: Trading success is all about following your trading strategy and the indicators should fit within your trading strategy, and not to be traded upon solely
The script is for informational and educational purposes only. Use of the script does not constitutes professional and/or financial advice. You alone the sole responsibility of evaluating the script output and risks associated with the use of the script. In exchange for using the script, you agree not to hold dgtrd TradingView user liable for any possible claim for damages arising from any decision you make based on use of the script