Original source: AICoin
In the volatile cryptocurrency market, investors often face the challenge of buying at the bottom and selling at the top. In order to help investors seize key opportunities in the bull market, AICoin Research Institute and Bitget Research Institute jointly conducted a series of classic strategy research, aiming to help users make wise decisions and avoid blind operations through in-depth analysis of core indicators.
In this study, we focus on an important indicator that is widely used but often overlooked: OBV (On Balance Volume). OBV provides another perspective on market trends by combining trading volume with price changes. Its uniqueness lies in that OBV does not rely solely on price changes, but incorporates changes in trading volume.
Considering that it provides a signal of potential trend reversal. Both AICoin and Bitget platforms support OBV indicators in their K-line applications, which assists investors in investment analysis.
In general, OBV has the following classic uses: confirming trends, escaping tops and buying bottoms, and judging the behavior of major players. OBV is often used in conjunction with moving averages to predict market conditions, price moving averages to find key points for price breakthroughs, and volume moving averages to identify institutional entry.
1. Usage
1. Confirming the trend
Uptrend: OBV rises as prices rise, indicating bullish strength.
Downtrend: The OBV declines with the falling price, which shows strong bearish sentiment.
2. Judging the main force’s behavior
1. The main force pushes up shipments
When the OBV line rises rapidly, it indicates that the buyer's power is about to be exhausted, and the main force pulls up and flees, which is regarded as a selling signal. If it appears late in the trend, the effect will be more significant.
2. Main force pressure plate
The price falls, but OBV rises, indicating that the buying is strong and the main force buys on dips, and the price may stop falling and rise again.
3. Main force wash
The OBV line rises slowly, but the price fluctuates violently, indicating that the buyer's power is gradually increasing, which can be regarded as a buying signal.
3. Use with other indicators
1. Use with moving average
The moving average can be selected as a simple moving average. The specific moving average and parameters can be adjusted according to personal viewing habits. Take EMA52+OBV as an example:
When OBV rises and the price remains above the EMA52 moving average, it is considered a bullish trend;
When OBV falls from its high point and the price breaks through and remains below the moving average, it is considered a bearish trend.
2. Breakthrough of key support and pressure
Buy signal: Breaking through the chip pressure or falling back without breaking the chip support, and OBV breaking through at the same time, is considered a bullish signal;
Sell signal: If the price falls below the chip support or fails to break through the chip pressure, and OBV falls below, it is considered a bearish signal.
3. Use with trading volume
a. Trading volume
After OBV moves sideways for a period of time, it breaks through MAOBV and the trading volume increases, which is a good time to buy.
b. Volume Moving Average
The average volume line is MA10 and MA40, and the specific parameters can be defined according to personal habits.
Buy signal: OBV rises, and the 10-day line crosses the 40-day moving average.
Sell signal: OBV is in a non-trending state, and the 10-day line crosses below the 40-day average volume line.
2. Escape from the top and buy from the bottom
1. Bottom-picking - OBV bottom divergence
Description: The price hits a previous low, but OBV fails to hit a previous low at the same time.
Interpretation: The weakening of selling pressure and the lack of downward force in the market usually indicate that the price may reverse upward, which can be regarded as a signal. OBV has shown a strong ability in identifying bottom-picking signals. When the price is in a downward trend, if OBV appears at a low level and no longer reaches a new low, it is the so-called "low divergence", which usually indicates that the downward momentum is weakening and the opportunity to buy at a bottom may come.
2. Escape the top - OBV top divergence
Description: Price hits a previous high, but OBV fails to hit a previous high at the same time.
Interpretation: Prices are rising, but trading volume has not increased. Bullish forces are weakening, which usually indicates that prices may pull back and can be seen as a signal to sell or reduce positions. Similar to capturing the bottom signal, when OBV reaches a new high and OBV no longer reaches a corresponding high, a high-level divergence occurs, which may indicate that the rise is weak and is a signal for investors to consider exiting. At the top of the bull market, investors are often easily driven by market sentiment, and abnormal changes in OBV can serve as a warning to help investors decide whether they need to re-evaluate their position strategies.
OBV indicator backtest
This issue uses three models for backtesting the OBV indicator:
Model 1: OBV bottom-picking and top-selling signals in a 1h sideways oscillation cycle
Win rate 20%, yield -0.34%
Model 2: OBV bottom-picking and top-selling signals in an upward trend under a 4h operation cycle
Win rate 83.33%, return rate 68.43%
Model 3: OBV bottom-picking and top-selling signals in a 4h operating cycle during a downtrend
Too few items, not included in the statistics
According to AICoin backtesting, the OBV indicator is suitable for rising markets, has many signals, and has relatively stable winning rate and yield rate.
Note: The underlying logic of the above strategy is based on OBV+EMA52 moving average
4. Analysis and Summary
In summary, the OBV indicator has important application value in the dynamic cryptocurrency market. Investors should flexibly use the OBV strategy according to different market conditions:
Bottom-picking opportunity: When the price hits a new low but OBV does not hit a new low, a bottom divergence signal is formed, which indicates that the selling pressure is weakening and it is a good buying opportunity.
Time to escape the top: When the price hits a new high but OBV fails to hit a synchronous high, a top divergence signal is formed, indicating that the bullish momentum is weakening. You may consider reducing or closing positions to avoid potential risks.
Confirming the trend: OBV changes with the price trend up or down, which can effectively determine the strength of the market.
Through this joint research, we hope that users can master the skills of using the OBV indicator to capture bottom-picking and top-selling, and improve trading efficiency in the bull market. In the future, AICoin and Bitget will continue to cooperate to explore the application of more classic strategies, provide investors with more valuable market insights, and help them move forward steadily in the cryptocurrency market.
About AICoin OBV indicator and custom indicators
1. AICoin OBV indicator:
1. Download and log in to AICoin
2. Select the OBV indicator in the indicator library of the market K-line page
(II) AICoin custom indicators: realize quantitative trading of all Bitget currencies!
AICoin's custom indicators allow users to deeply customize according to their own trading strategies and risk preferences. Whether it is tracking market trends, quantifying signals, or setting specific trading conditions, you can create indicators that meet the user's unique needs through simple adjustments!
At the same time, AICoin's custom indicators fully support all currencies on the Bitget platform. Whether it is mainstream currencies or emerging hot currencies, users can easily apply custom indicators for analysis and trading, ensuring that they can handle every transaction with ease.
Choose AICoin custom indicators, start your quantitative trading journey, seize every market opportunity, and achieve more efficient returns on investment!
About Bitget OBV indicator and copy trading products
1. Bitget OBV indicator
1. Download and log in to Bitget
2. Switch to OBV at the bottom of the market K-line page. This indicator can be viewed on both the web and mobile terminals.
(II) About Bitget's copy trading products: No fear of market changes, accurately grasp the long and short trends
Bitget is the first cryptocurrency trading platform to introduce copy trading, which was officially launched in May 2020. Currently, Bitget supports spot copy trading and contract copy trading. New traders can view the investment portfolios and historical performance of trading experts, choose to subscribe to strategies that meet their return expectations and risk preferences, and gather top trading experts to share strategies. The platform has more than 180,000 trading experts and 800,000 copy traders, and more than 90 million successful transactions.
Disclaimer
This article is for information sharing only and represents the author's personal views only, not Bitget and AICoin's position. We do not provide any form of trading advice, including but not limited to specific investment recommendations, digital asset buying and selling advice, or financial, legal and tax guidance. The information presented may be inaccurate or incomplete, so please carefully assess the relevant risks before investing. The trading and holding of digital assets may face drastic price fluctuations, so be sure to carefully consider whether to participate based on your personal financial situation.