TA Challenge: How does OBV reflect the relationship between volume and price?
Hey mooers,
After learning how to look for divergences between price and volume in the previous post, it's time to learn how to use on-balance volume (OBV) to confirm the underlying trend.
After learning how to look for divergences between price and volume in the previous post, it's time to learn how to use on-balance volume (OBV) to confirm the underlying trend.
Traders often use the OBV to look for trend confirmations or try to correctly identify the strength and the direction of the ongoing trend. The OBV line's slope is also helpful. A trend accompanied by an OBV line with a steeper slope indicates it is growing stronger.
Trend Confirmation
In the chart, the stock broke its downtrend line in late February, and OBV confirmed a resistance breakout in March.
Then, it broke the uptrend line in late April, and OBV confirmed a support break in early May.
Afterward, the stock broke its downtrend line in early September, and OBV confirmed with a trend line break a week later.
These coincident signals indicated that positive and negative volumes harmonized with the price.
Is OBV exactly flawless?
Of course not. It produces signals, but doesn't reveal much about them. We'd better combine it with other indicators, such as adding MACD indicator.
OBV+MACD
The chart shows that a rising OBV reflects positive volume pressure, leading to higher prices; the steeper slope indicates it is growing stronger.
Also, keep in mind that if the change in the slope is too drastic, it can indicate a trend approaching its end. A steep OBV line signal suggests that the market sentiment is getting too positive or too negative, which will likely bring a reversal.
Meanwhile, we can refer to the MACD indicator. When the DIF crosses below DEA, it signals to sell.
Rewards: $20 Stock Cash Coupon
Have you mastered the use of the OBV? Share what you've learned at #TA Challenge
Have you mastered the use of the OBV? Share what you've learned at #TA Challenge
Review the previous TA topics:
1. MA: How do you identify trends with moving averages?
2. BB: Breakout? Reversals? How to use Bollinger Bands?
3. RSI: How does RSI tell whether a stock is overbought or oversold?
4. KDJ: A short-term trading tool you can't miss
5. PSY: Emotional trading is bad? PSY doesn't think so!
6. SAR: How to use the SAR to spot reversal signals?
7. BIAS: A day trading tool for the rebound
1. MA: How do you identify trends with moving averages?
2. BB: Breakout? Reversals? How to use Bollinger Bands?
3. RSI: How does RSI tell whether a stock is overbought or oversold?
4. KDJ: A short-term trading tool you can't miss
5. PSY: Emotional trading is bad? PSY doesn't think so!
6. SAR: How to use the SAR to spot reversal signals?
7. BIAS: A day trading tool for the rebound
Talk to us
Which indicators do you think can be combined with OBV in trade? Why?
Which indicators do you think can be combined with OBV in trade? Why?
*We will select 8 TOP COMMENTS for this post. Winners will get 200 points after this challenge, with which you can exchange gifts at Reward Club.
Disclaimer: This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Tap more.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Milk The Cow : This is mine:
https://www.moomoo.com/community/feed/108832271826950?data_ticket=e577728400cbeaa02d8a4acaaf3a354d&futusource=nnq_followtab_list&content_type=feeddetail
Milk The Cow Milk The Cow : I totally has no idea how to use OBV correctly...
What is even OBV about... Can't I just look at the candle chart trend movements?
Welp, whatever... Ok, approved.
ANC Investments : Great info I'm now starting to put things together 1st year trader
Weicl :
practical Alpaca_935 : ??????????????????
70673172 : TTM Squeeze indicator, would be a great indicator to pair with the OBV. The TTM squeeze uses the bollingerbands and Keltner channels to evaluate consolidations and signal when prices are likely to break out. This would add a layer of validation and strength to the analysis.
ZnWC : On-board volume (OBV) indicator is new to me. I'm still learning how to find the divergent (or convergent) trend. I think it may help me to analyze the share price trend better with Bollinger Band (BB). My humble opinion
Trent Eastwood : RSI indicator to help gauge if overbought (60 range) or oversold (30 range).?.
Skyblue82 : To me, other indicators provide the overall economic health and trend, OBV provide the entry and current market sentiment. Hence for once to be slightly lucky in trading, they need to combi both in order to gain a slight adv against other traders.
Tonyten88 : Another installment of the challenge!!! The more you learn the more you earn!
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