|By Nathan Young|
July 12, 2017
The on balance volume indicator or OBV for short is used when looking for momentum identification in a market. When people are looking at a chart, many wonder where the money is coming from and this indicator attempts to sort between the institutional big bank money and individual investor money.
When looking at the indicator, it typically sits at the bottom of the chart and when it is increasing, this means there may be positive pressures whereas if the indicator is falling, there may be negative pressures in the market pushing the price down. As with any indicator, this is open to interpretation and further research on the market.
With this particular indicator, wild moves in the market may throw off the accuracy of the tool that requires time for the indicator to settle back into place.
Certainly not all indicators are useful to all traders but understanding volume and where money is going is key. Looking at a chart by itself can only tell you so much and while having these indicators make the job a little easier, it is important to look under the hood of the market you are targeting because fundamental analysis will unearth items that a chart may miss.
This is a well known indicator so you should have no problem finding articles and helpful videos on how people use it. Macroaxis is a wonderful site that can help guide you through understanding this indicator, plus if you find this is not the right fit, there are alternative options to look and test on your charting platform. Remember to use a demo account to acclimate before going live.