Recently, I saw many people in the community asking what OBV means. In fact, this indicator is especially useful in actual trading. Today, I want to share my understanding.

On-Balance Volume is used to determine the strength of price trends by accumulating trading volume. Simply put, it records the daily trading volume but adjusts the direction based on whether the closing price is higher or lower than the previous day. If the closing price rises, that day's volume is considered positive; if it falls, it is considered negative. This way, you can see whether buyers or sellers are in control.

I believe the core value of OBV is in confirming trends. For example, if Bitcoin is rising and the OBV line is also increasing, it indicates that the current rally is supported by genuine buying pressure, not a false breakout. Conversely, if the price hits a new high but OBV is decreasing, you should be cautious—this may mean that although the price is rising, the actual buying strength is weakening, and upward momentum could be exhausted.

Volume analysis is also very important. Sometimes, you see significant price fluctuations with average volume, and in such cases, you need to be especially careful. A truly strong market should see OBV moving in tandem with price trends. If new highs are not accompanied by new OBV highs, the rally might be somewhat fake.

The most common technique I use in actual trading is watching for divergences between price and OBV. This often serves as an early warning sign of reversals. Another detail is that when OBV breaks through previous resistance levels, it usually triggers a stronger move. You can use this to judge the validity of support and resistance levels.

Of course, OBV should not be used alone; it’s best to combine it with other indicators and candlestick patterns. Different trading timeframes require different strategies; parameters for short-term and long-term trading may need adjustment. I recommend spending time practicing with historical data to get a feel for how this indicator performs under different market conditions, so it becomes more intuitive to use.

Overall, mastering the OBV tool can help you better understand the underlying trading forces in the market, aiding in judging the authenticity of trends and in bottom-fishing or top-selling. On platforms like Gate, you can directly bring up the OBV indicator to assist your decision-making.