On Balance Volume
On Balance Volume (in short, just OBV) is a tool of technical analysis, which you can find on the MetaTrader4 platform or the new version, Metatrader5. It is used to identify the trend in the market and to determine its direction. Thanks to this robot, a trader can define, what is dominant in the market, a bullish trend or a bearish one. It also shows the other sides of the market, analyzing it from inside. The robot is an excellent choice for trading in any market: stock, currency, securities market or the market of precious metals. It has already been used for many years, as the first time, the world had seen it in 1963. However, it is still popular.
What is the balance volume?
The balance volume is the ratio of the value of a currency pair and the scale of trading in the world market. It can be applicable to all assets and currency pairs. It can’t be said, that it works better with some instruments of technical analysis, because everything depends on your preferences.
There are two types of the balance volume:
- Positive - appears, when the closing price is higher, than the previous price;
- Negative - appears, when the closing price is lower, than the previous price;
According to the central theory of this indicator, the balance volume should be higher, than the price volume. All the relevant indicators are constructed on this theory.
How to trade using the OBV indicator?
Before trading, download the indicator On Balance Volume of any version from the website MTDownloads for free. This indicator is very popular among traders, as it can be used in different trading situations:
- When the levels are breaking through, the trend reverses. So, if the bullish trend is dominant, than the bearish begins and vice versa;
- The confirmation of the breaks through the levels of support and resistance. If the maximum value of the robot breaks through - it confirms the breakthrough of the line of resistance. Conversely, if the minimum value of the robot breaks through - it proves the breakthrough of the support line.
- If the OBV’s indexes grow along with the price chart, than a bullish trend dominates in the market;
- If OBV’s indexes fall along with the price chart, than the bearish trend dominates in the market;
- If the price chart grows and the indicator's indexes are going down - it is a signal of the divergence and it gives the information about the early reversal;
- If you are a beginning trader and are just starting to master the technical analysis. This robot suits you best, as its graph is very easy to read and to use, and you don’t need to understand much in order to use it.
You should remember, that this indicator gives the information about the future price changes of the asset, but not at this very moment, which gives traders the opportunity to open deals at the most favorable moment, having enough time for analyzing the situation from different sides, without making hasty decisions. Despite the name of the instrument, it doesn’t give the information about the exact amount of trades, but you can get many signals, basing on the volume fluctuations. You don’t need much time to understand the settings of this Expert Tool, as it doesn’t have many parameters, which could be adjusted. It makes its usage as comfortable as possible. You can test all the abilities of this robot by trying to trade with it on a demo account, after what, you will really understand, how it works and how to make profit by trading with it.
The usage of the indicator of balance volume with other instruments of technical analysis
This tool of technical analysis is very sociable with others and it fits perfectly many indicators. As it was already mentioned, the lines of support and resistance help to make the robot’s signals more accurate. However, even using a robot without other instruments will be a good choice for the successful trading. By the way, basing on the indexes of this instrument, you can build the most successful trading strategy on discrepancies. The only thing, which is important to remember is that the indicator will not give you the accurate trading signals up to a single point, as it is working ahead of time. You must independently apply your knowledge of analysis to achieve success and get a good profit.
All in all, by choosing such an instrument of technical analysis, as OBV, you can build the entirely different trading strategies. Any trader can quickly and relatively quick learn to use this tool. In order to download the new version of the indicator On Balance Volume for free, find it on the website MTDownloads.