How to read the On Balance Volume (OBV) Indicator

Ever have a hard time reading volume? Allow me to give you the cliff notes. The more trading volume a stock/crypto/forex pair simply means traders/institutions coming into the trade. We now have a volume indicator to help gauge market participants sentiment. Why is this important? Volume is the driving force in all markets. No volume and you could be bag holding for a a bit or a long while. *The RSI measures the Strength/intensity of a move*. So? Like volume the OBV measures the volume changes to help make price predictions. Sharp movements in the OBV suggests big traders are lurking nearby. OBV works beautifully on the 4hour+ time frames.

Note: OBV does not show overbought or oversold like the RSI

I use OBV to spot divergences and surges in volume. While others traders may use it for trend confirmations or breakouts I feel like the RSI does that already so its not necessary, But that’s just me. The MacD could easily do that for even a beginner and uses a moving average. So when you’re using the OBV you’re looking for higher highs(in bullish runs) and lower highs(in bearish runs). You want a higher peak then the previous peak. Higher peaks indicate trading volume is matching with volume movement. The opposite is true for bearish.

Negative/positive volume or outflows/inflows coming out of Rune and we can see that with the RSI

Sharp moves, as I clearly said earlier. The OBV is gradually going up yet the trend is going down, so this is divergences. But what you want to wait for is a flat base similar to the distribution that you see in the $5.50–6 range. Hey isn’t that the squeeze indicator job?! Yass! Great minds think alike! So you can see the green volume spike and it’s a little too early to tell but you can see a long wick on the second red wick on the chart. Are the bulls/buyers stepping up? Still a little early to say but we can watch the OBV and look for higher peaks. Maybe get in on a 4 hour squeeze in another tutorial that I covered.

Simply Put, look for peaks that are lowering in direction for divergences and price doing the opposite. Its easier to spot Divergence with OBV Indicator then watching the RSI like a hawk. You can visually see if red/green peaks are increasing or not. Observe the chart below for better understanding.

Luna on 4hour — Look for decreasing red/green to help spot divergences as indicated

The process repeats all the time. I’m not saying you need to be a pro trader, but you can certainly feel like a pro trader using Altrady Desktop App and the wonderful world of indicators that can help you visually see market sentiment fueled by volume. I put my OBV and RSI together, again that is my thing. You may not like it but I do. But for the purpose of this tutorial I did not have it on.

Note: There is NO such thing as a HOLY GRAIL or the ultimate indicator. Indicators tell you what may happen and you simply take the chance or not. I like to call it trading with an EDGE!

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