# On Balance Volume, OBV



## John Trader (14 December 2015)

Interpretation of the indicator On-Balance Volume is based on the principle, that OBV changes precede price. According to this principle, increasing the volume of the balance indicates that professionals are investing in tools. When the public then are beginning to invest, both the price, as OBV indicator readings begin to grow rapidly.

If the price advances in its motion the indicator On-Balance Volume, so-called "non-confirmation" arises. It can be seen at the top of the bullish market (when the price increases without a corresponding increase of Balance Volume or ahead of it), or at bear market bottoms (when the price falls without a corresponding reduction of Balance Volume or ahead of it).

You can talk on an upward trend of On-Balance Volume, when each new peak is higher than the previous, and each new trough higher than the previous. Similarly, the downward trend of OBV requires the consistent reduction of peaks and troughs. When OBV is moving in sideways, not making successively raising and lowering peaks and troughs - it is a doubtful trend.

If a trend is established, it remains in force until it is broken. The turning point in the trend of the indicator On-Balance Volume can happen in two ways. In the first case the trend changes from a rising to ascending, and vice versa.

In the second case of a fracture, the OBV changes to a doubtful and remains doubtful for more than three periods. Thus, if the upward trend changes to a doubtful and remains doubtful for only two period before changing back to a rising, we must assume that the OBV all this time has been rising.When the trend of the indicator On-Balance Volume is changed to ascending or descending, the so-called "breakthrough" occurs. Since OBV breakouts normally precede price breakouts, investors should take a long position in the OBV upward breaks and, consequently, sell in case of OBV break down. Positions should be held up until the trend changes.

Cheerz!


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