On-Balance Volume (OBV) is a momentum indicator in technical analysis that charts volume flows over time. It provides traders with valuable insights into the strength of price trends and the likelihood of their continuation or reversal.
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Having utilized OBV for numerous years, I can demonstrate its effective application in your trading strategy.
Key Takeaways:
- OBV combines price movement and volume to gauge market trend conviction.
- Cumulative volume flow facilitates trend analysis and informed decision-making.
- The direction of the OBV line can indicate bullish or bearish market sentiment ahead of actual price movements.
- Divergences between OBV and price trends may signal potential price reversals.
- By considering the total trading volume and adjusting it based on price movements, OBV operates on the premise that volume precedes price changes. This implies that alterations in volume can potentially predict future fluctuations in stock prices.
Full Indicator Testing Performed with TrendSpider: Simply the Best AI-Powered Backtesting, Trading & Research Software.
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Many chart indicators are not profitable, but KDJ is, although it has its weaknesses. Learn everything you need to know about trading the KDJ indicator.
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My name is Barry Moore, and I am a certified financial technician with the International Federation of Technical Analysts. I have been independently researching, trading, and investing in the stock market for over 20 years. Back in 2010, I founded liberatedstocktrader.com, a business that has helped educate over 40,000 people so they can take control of their own investing decisions.
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