Following from part one of volume we move on to On Balance Volume (OBV).
OBV was first developed by Joseph Granville. He believed that volume was the driving force behind markets and developed OBV to forecast when major moves would occur based on volume changes.
OBV is an indicator of momentum, measuring changes in volume to determine price direction.
OBV provides more information than the volume histograms typically found at the bottom of the charts.
This particular indicator is a leading one, while some traders will trade on OBV alone, it isn't recommended.
Always support your ideas with additional TA for confluence.
Time Stamps
2:37 – XTZ Previous COTW (DO NOT TRADE THIS)
12:05 – BTC TRADES REVIEW
34:24 – OBV (ON BALANCE VOLUME)
- OBV is the cumulative total of volume (positive and negative)
- OBV is a leading indicator – volume leads price
- One can trade patterns (TA) on OBV – if OBV breaks downwards we can expect the price to break down soon. Some people trade off of this and it works for them. Daniel does not though.
- OBV can be used for identifying divergences at tops and bottoms
- Price making HH and OBV making HH = healthy uptrend (new money coming in)
- Price makes new highs but OBV does not = bearish
- Price is consolidating but OBV is going down = bearish
- Price is consolidating but OBV is going up = bullish
49:50 – Q&A
- OBV is calculated from candle closes but Daniel looks at wicks when the price is ranging because PA reached there and it is still important to him.
- When looking for divergences though, one can look from candle closes because you are looking at divergences at market highs/lows
P.S.
CVD measures market orders (delta)