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        TA Challenge: OBV, forecast market moves & spot reversals
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        TA Challenge: How does OBV reflect the relationship between volume and price?

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        Meta Moo joined discussion · Aug 15, 2022 22:50
        Hey mooers,
        After learning how to look for divergences between price and volume in the previous post, it's time to learn how to use on-balance volume (OBV) to confirm the underlying trend.
        Traders often use the OBV to look for trend confirmations or try to correctly identify the strength and the direction of the ongoing trend. The OBV line's slope is also helpful. A trend accompanied by an OBV line with a steeper slope indicates it is growing stronger.
        Trend Confirmation
        TA Challenge: How does OBV reflect the relationship between volume and price?
        In the chart, the stock broke its downtrend line in late February, and OBV confirmed a resistance breakout in March.
        Then, it broke the uptrend line in late April, and OBV confirmed a support break in early May.
        Afterward, the stock broke its downtrend line in early September, and OBV confirmed with a trend line break a week later.
        These coincident signals indicated that positive and negative volumes harmonized with the price.
        Is OBV exactly flawless?
        Of course not. It produces signals, but doesn't reveal much about them. We'd better combine it with other indicators, such as adding MACD indicator.
        OBV+MACD
        TA Challenge: How does OBV reflect the relationship between volume and price?
        The chart shows that a rising OBV reflects positive volume pressure, leading to higher prices; the steeper slope indicates it is growing stronger.
        Also, keep in mind that if the change in the slope is too drastic, it can indicate a trend approaching its end. A steep OBV line signal suggests that the market sentiment is getting too positive or too negative, which will likely bring a reversal.
        Meanwhile, we can refer to the MACD indicator. When the DIF crosses below DEA, it signals to sell.
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        Have you mastered the use of the OBV?Smart Share what you've learned at #TA Challenge
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        Which indicators do you think can be combined with OBV in trade? Why?
        *We will select 8 TOP COMMENTS for this post. Winners will get 200 points after this challenge, with which you can exchange gifts at Reward Club.
        Disclaimer: This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Tap more.
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