The OBV indicator explained

How does the OBV work?

1. The calculation is simple. On-Balance Volume compares volume and daily closing price. Is the price going up? We add volume. Is it going down? We subtract it. It's that straightforward.

   • Higher close: volume adds up. • Lower close: volume is subtracted.

It seems somewhat mechanical, but there is a certain magic in these numbers.

2. Reading the OBV:

   • When it rises alongside the price, the bullish trend has strength. Good sign. • If it falls with prices going down, the bears dominate the market. • Do you see the price rising but the OBV is falling? Mmm, something doesn't add up. The trend might be running out.

3. You're not alone. OBV works better when accompanied. Combine it with RSI or MACD. The signals become clearer. It's not perfect, of course, but it helps a lot to confirm what you suspect.

Strategies with OBV for 2025:

The smartest traders look for divergences. There lies the gold. They see when the price does one thing and the OBV another. Before jumping in, they wait for confirmation in the price. Past tests suggest that this works. Especially if you take care of your money with good risk management. It doesn't seem like magic, but sometimes it does.

How does it compare with other indicators?

The OBV measures accumulation. The VWAP combines price and volume to show "fair value". Quite different. The Chaikin Money Flow tracks market pressure. And the MFI? It measures momentum with volume. Each has its moment. OBV for trend strength, VWAP for average prices, CMF for following smart money, MFI for confirmation. It depends on what you're looking for.

In summary:

The OBV helps both speculators and investors. It shows you the relationship between price and volume. Useful for deciding when to enter or exit. It is not infallible, but boy does it help.