What Is On Balance Volume?
The on-balance volume (OBV) is a momentum indicator that uses volume flow to predict changes in stock price. Joseph Granville developed the OBV metric in the 1960s. He believed that when volume increases sharply without a significant difference in the stock’s price, the price will eventually jump upward and vice versa.
On Balance Volume (OBV) Indicator
The On Balance Volume (OBV) is a technical indicator of momentum, using volume changes to make price predictions. OBV shows crowd sentiment that can predict a bullish or bearish outcome.
How To Calculate The On Balance Volume
Why Use The On Balance Volume
The OBV is based on the contrast between smart money and retail investors. Here, the smart money is institutional investors. Once certain funds begin to purchase an asset from retail investors, volume in the market may increase, but the price may remain constant. However, in some time, the volume may drive the prices up, and then larger investors begin to sell, and small investors start buying.
How to Use The On Balance Volume Trading Strategy
Bullish Scenario:- OBV rises when volume on up days outpaces volume on down days. A rising OBV reflects positive volume pressure that can lead to higher prices.
Bearish Scenario:- OBV falls when volume on down days is stronger. Falling OBV reflects negative volume pressure that can foreshadow lower prices.
Building The On Balance Volume Trading Strategy in Mudrex
BUY:- MACD crossesup 10000.
SELL:- MACD crosses down 10000
Creating on Mudrex:-
We will use 2 OBV indicator blocks – one for selling and one for buying.
For buying, we will use the following settings:-
For selling, we will use the following settings:-
Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 339.42%