TA Challenge: OBV
On-balance volume (OBV) is a leading momentum-based indicator which looks at volume to enable traders to make predictions about the market price. Traders will focus on increases or decreases in volume, without the equivalent change in price. This is believed to be an indication that the price will increase or decrease imminently.
OBV works well on trending markets. It should not be used when markets are consolidating.
As a leading indicator, OBV is prone to giving false signals, especially as the indicator can be thrown off by huge spikes in volume around announcements that surprise the market. Although volume changes, this is not always indicative of a trend and can cause traders to open positions prematurely.
As with the other leading indicators, the OBV is often used in conjunction with lagging indicators. It is possible for lagging indicators to give off false signals, but it is less likely as they are slower to react.
OBV and MACD
OBV works well on trending markets. It should not be used when markets are consolidating.
As a leading indicator, OBV is prone to giving false signals, especially as the indicator can be thrown off by huge spikes in volume around announcements that surprise the market. Although volume changes, this is not always indicative of a trend and can cause traders to open positions prematurely.
As with the other leading indicators, the OBV is often used in conjunction with lagging indicators. It is possible for lagging indicators to give off false signals, but it is less likely as they are slower to react.
OBV and MACD
The chart above shows $Acesian Partners(5FW.SG$ using the OBV and MACD indicators. Bullish and bearish crossovers in the MACD generated buy and sell signals. Generally, the price and OBV move in the same direction. That is the OBV follows and confirms a trend. In Jun 2022, the OBV rose but the price fell. This is a bullish divergence which indicated that the price would eventually rise. Conversely, the price would eventually fall if there's a bearish divergence. A trend reversal would occur.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Moo Contributor
Follow me to get useful analysis, learn TA and make profitable trades.
Maximise profit 利润最大化
7184Followers
44Following
25KVisitors
Follow
Wes 88 : what are some other leading indicators??
teo ho 101661850 : fig 1 show daily chart with bullrider 21 indicated uptrend n downtrend.
Add 30 mins chart , can respond faster show uptrend or downtrend.
thanks u bullrider 21
bullrider_21 OP Wes 88 : Some other leading indicators are RSI and stochastic oscillator. Moving averages are lagging indicators, but can also be leading indicators as they may signify where the price may find support or resistance in the future. The price will often move back to the MA because of mean aversion, which is where the price moves back to more normal or average levels after pulling away from the average. Bollinger Bands are lagging indicators they have a MA and outer bands that can act as a leading indicator, as they help to identify areas of dynamic support and resistance where the price may stall or reverse.
bullrider_21 OP teo ho 101661850 : np. Yes, you can do that.
Giovanni Ayala :
Giovanni Ayala : Every thing is on Red
