#Educational

OBV (On Balance Volume)

On Balance Volume is a volume indicator that uses trading volume to predict if a price will change. The idea behind OBV is that the trading volume impacts the price and can serve as a powerful tool to decide if a trend will last or not.

On top of that, OBV also offers clues as to what type of participants are trading in the market. For instance, if the volume increases and the price remains flat, it could imply that institutions or more sophisticated players are buying assets from retail traders only to then sell them back as soon as the price goes up.

Unlike for the RSI, numerical values aren’t important to generate signals with the OBV because it’s a momentum indicator. The slope and its direction provide more insight than the absolute value.

✅ Broadly speaking, when the volume on up days is outpacing the volume on down days, we can expect an asset to follow the move up eventually. The steeper the slope, the stronger the trend.

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