There are various technical indicators that traders use to place buy and sell orders. Most of them talk about the price and the value of the stock or the chosen asset. There are very few that touch on the volume aspects and on balance volume strategy or OBV is one such indicator. This one talks about the volume of the chosen stock and can be very interesting to be used along with the other indicators. Read bitcoin loophole scam review
On balance volume –
It has been decades since this strategy was introduced. It is a great idea to study the price of a stock and its relationship with the volume. A better and a more dependable order would be the one that is placed on the analysis of the price movements and the coherence with the change in the volume as well.
The method of finding the OBV is quite simple. Take the closing session and compare it with the previous day chart. If the price is higher than the previous closing session, or in other words, if it was an up day, plot the volume of that day on the OBV chart. If the next day happens to be another up day then add the day’s volume again to the previous one.
Keep doing this for a while. If there is an up day, add the volume and if there is a down day then subtract the volume from the chart. There might be days when the price movements are very high but the volume changes might be less. In these occasions taking your decisions based on the prices alone would not be a good idea. So OBV is pretty handy in these cases.
Why does the OBV really matter?
If the price drop is also accompanied by a large volume it indicates that there have been too many sellers causing the demand and thus the value to drop. This would also indicate the presence of very few buyers.
When you combine this with the RSI or relative strength index you would be able to understand the situation better. On the days where the price drops but the volume is not too high, it means that there is still a positive outlook for the stock.
There are optimistic traders trying to push the price back in the upward trend. This would be a great buying opportunity. OBV is a value that keeps rising and falling. The change in the value from the point where you started would not be very significant in this case.
When you plot the OBV on a graph you would be able to interpret it better. After all, without the graph, it would simply be a number that is positive, negative or of a value that equals zero.
When there is a huge change in the volume you would see that the OBV chart suddenly reverses and drops low. This might be a possible indicator of a price reversal on the stock chart. Thus if you compare the charts close you would find that OBV would help you double check the interpretations based on the price charts.