OBV On Balance Volume Indicator Explained Simply & Understandably. // basics tutorial strategy


OBV On Balance Volume Indicator Explained Simply & Understandably. // tutorial trading strategy indicator beginners day secrets video chart patterns youtube stocks settings john swing daily chart rsi stochastics macd technical scalping basics how to use david moadel eleven welcome to looking at the markets with
David Modell today I’m going to give you a brief and easy introduction to the obv
or on balance volume indicator so here we go
developed in the 1960s by Joseph Granville the on balance volume or obv
indicator is based on the idea that volume is just as important as whether a
period or candlestick closed green or red the obv indicator only Rises a lot
when a period or candle closes green meaning above the previous periods close
with heavy volume if the volume is light the obv indicator won’t rise a lot even
if the stock’s price went up a lot similarly the obv indicator only Falls a
lot when a period or candle closes red meaning below the previous periods close
with heavy volume if the volume is light the obv indicator won’t fall a lot even
if the stocks price went down a lot the idea is that the stocks price action
will follow where the volume flow is going in other words volume precedes
price it’s just a theory but it makes for a unique and interesting indicator
to add to your toolbox a divergence between the direction of the obv
indicator and the direction of the price action of the candlesticks might
possibly indicate the future direction of the stocks price and there are a
couple of examples of that this is a daily candlestick chart of the price
action of Ford stock alright each candlestick represents one day of price
action and here’s the obv and this is from stockcharts.com
so I want to give them credit alright so we can see examples
of a divergence right over here alright we’ve got the price action going up all
right you’ve got a higher high here but at the same time you’ve got a lower high
on the obv or on balance volume indicator ah all right price action
going up obv indicator going down and the which one turned out to be right the
candlestick direction or the obv indicator direction well we can see that
the candlestick direction that this was a head-fake all right it looked like it
was gonna go up but it went down quite a bit and so the divergence here in this
case showed that the the on balance volume told the truth here and so in
this case it looks like volume proceeded price doesn’t always work but it worked
in this case here’s another similar example with the daily candlestick chart
of sprint stock and we can see the unbalanced volume indicator just going
down down down it’s not making higher highs here it’s just it’s starting and
then going down making lower highs lower highs lower highs all the way down and
there were times here where it looked like Sprint was that the stock was gonna
recover and start going up like over here started going up and you might have
gotten optimistic here you might have wanted to buy it but if you checked the
lower highs on the on balance volume indicator you might have known better
than to buy here because it looks like once again the price came after the
volume in other words volume proceeded price the obv indicator told the truth
more than the head-fake on the candlesticks here all right
and it happened quite a few times here were it looked like it was going to
start going up but like for example over here you can see the candlesticks making
higher highs here but look at the obv indicator alright it went up and then
right back down alright also we can see it for example over here
looks like it was going to go up but we see lower highs in the OB the indicator
and we saw what happened afterwards alright it’s kind of subtle alright it’s
not gonna be very very obvious you have to kind of look for it and it does not
always work but it’s a really unique and interesting indicator if you want to
place more emphasis on volume in your trading the obv indicator is best used
not in isolation but rather in conjunction with other indicators as
well as your own judgment and common sense so feel free to add this to your
toolbox of indicators alright this was just an introduction but I hope that
give you an idea of what the unbalanced volume or obv indicator is all about so
please give this video a thumbs up leave comments and subscribe to my youtube
channel if you haven’t done that already and if you’d like to get some help with
indicators trading investing putting together a plan for your trading or
investing because you definitely need one you can email me at any time my
email address is David Modell at gmail.com thank you so much for watching
and listening and I’ll talk to you again soon

15 thoughts on “OBV On Balance Volume Indicator Explained Simply & Understandably. // basics tutorial strategy”

  1. Great video. And β€˜flow’ is paramount. You never know of course but it’s a great indicator. Along with chaikin money flow and chaikin oscillator-which should be put up together. Vol, money flow and rate of money flow direction makes money. In either direction.

  2. Hey David another great video thank you… I have two questions
    1.Is there any volume hidden that the OBV can't see? ( insiders trading)
    2. Does a low float affect how useful the OBV can be used. "ALOT" of volume seem relative.
    What do you think?

Leave a Reply

Your email address will not be published. Required fields are marked *