Recently studying volume indicators, I found that OBV is indeed underestimated by many people. Its full name is the On-Balance Volume or Net Volume Indicator, and the core logic is quite simple—digitizing daily buying and selling forces, combined with price movements to judge market sentiment.

The calculation method is this: today's OBV equals yesterday's OBV plus today's trading volume. The key is to look at the position of the closing price. If the closing price is higher than the previous day, take a positive value; if lower, take a negative; if unchanged, zero. In simple terms, OBV considers volume during price increases as crowding, adding it; during declines, as crowd dispersing, subtracting it.

I think OBV is effective mainly based on three principles. First, the more inconsistent investors' views on price are, the larger the trading volume, and vice versa. So volume reflects market popularity and the comparison of bullish and bearish forces. Second is the gravity principle—rising prices require substantial energy support, especially initially with obvious volume increases; but during declines, less energy is needed, and volume may shrink. Third is inertia—the hot stocks tend to have larger volume and price swings over a period, while less popular stocks remain relatively calm.

In practice, the most common method with OBV is to combine it with a 10-day moving average. When OBV crosses above the 10-day moving average, it indicates net capital inflow, which can push up the stock price—this is a buy signal. Conversely, when it crosses below, it indicates net outflow, making upward movement less likely.

I’ve summarized some practical buy and sell points. For buying, one is when OBV consolidates sideways for over three months and then breaks upward—this can be a buy point. Another is when OBV and price show a bottom divergence, meaning the price keeps falling but OBV rises, indicating weakening selling pressure and increasing funds absorbing at lows, suitable for buying. If OBV and price rise slowly together, it indicates a healthy upward trend, also suitable for chasing gains. For selling, when OBV and price show a top divergence, it’s a bearish signal. Another is when OBV accelerates upward but price doesn’t, often indicating large players are distributing at the top; when OBV stops accelerating, it’s a sell point.

For more complex methods, you can calculate the net long-short ratio. Most trading software uses the simple version, but the complex version is actually more effective. The complex version considers the position of the closing price within the day’s high and low to calculate a more precise net capital flow.

Another technique I often use is dividing the Y-axis values into several zones. During a bull or bear market, use a horizontal timeline of over half a year; during sideways consolidation, use 1 to 3 months. Pay special attention to bottom divergence and abnormal movements of OBV, which can clearly signal potential black horse stocks. For example, after a sharp decline, if OBV stabilizes and consolidates in the 0-20% zone for over a month, it often indicates decreasing short-term selling pressure and increasing funds absorbing at lows, suggesting a big move could happen soon.

When OBV surges straight up from the 0-20% zone, it indicates the main players have completed accumulation and are entering a rising phase, with volume continuously expanding. As long as OBV and price rise together, it’s safe to chase the rally. Conversely, if OBV stays narrow in the 60-80% zone while the price drops sharply, it might mean the big players are trapped; short-term traders can try to rebound with other indicators. When OBV reaches the 80-100% zone and forms a V-top, M-top, or rounded top, caution is needed—bullish funds are running out, and the big players may be distributing. Once OBV turns downward, it’s time to exit.

However, I must say that while OBV is a powerful tool for catching big players, it has limitations. Its analysis methods are relatively simple, with limited judgment functions, and can sometimes produce distortions. Stocks with daily limit-ups or limit-downs can also impair OBV’s effectiveness. Therefore, it’s best to combine it with other tools like the PSY sentiment indicator, CCI short-term trend indicator, etc.

Regarding investment, I want to emphasize an important point—investment is not about prediction, but about decision-making. Many people like to forecast the future, guessing the market’s direction tomorrow, next week, or next month, predicting macro data, company performance, stock prices. Sometimes they get it right and feel proud; if wrong, they blame everything else. The problem with this mindset is that the market is influenced by too many complex factors, and no one can accurately predict it with just one or a few indicators.

Smart investors don’t predict the future; they focus on the present. At this moment, what decision is most beneficial for themselves? If the current situation is favorable, think about how to maximize gains and minimize risks. If it’s unfavorable, consider how to avoid risks and reduce losses. Regardless of good or bad, there should be no emotional reactions—only decisive reassessment of the situation and making the most correct decision.

Predictive thinking sets a fixed pattern in the mind for the market; when reality doesn’t match, it leads to contradictions and decision paralysis. Decision-based thinking, on the other hand, has no fixed pattern—only various possible scenarios and corresponding responses, calm and rational. This mindset requires deep understanding of economic development, the direction of the times, market operation, and corporate fundamentals, knowing what situations may arise and how to respond in each case. My investment philosophy is not to predict the market but to judge the current forces and their interactions, making the best decisions based on that. This approach can avoid major risks, seize big opportunities, and achieve steady wealth growth.