There’s something I’ve noticed that many traders still don’t give enough attention to: using trading volume to confirm the price trend. In fact, price increases or decreases must be supported by trading volume to be trustworthy.

I’d like to recommend a tool that helps a lot—on balance volume. It’s an indicator designed to measure the accumulated buying and selling pressure of the asset you’re trading. This indicator has been developed by Joseph Granville since 1963. He believed that trading volume is the true driver behind price movements.

Its working principle is quite simple. If the closing price is higher than the previous one, on balance volume increases by that trading volume. If the closing price is lower, the volume is subtracted. And if the closing price stays the same, the OBV doesn’t change. With this approach, we can track what the big players are doing.

What’s interesting is that when we see the price rising but on balance volume doesn’t rise along with the accumulated trading volume, that’s called divergence. It’s a warning sign that the uptrend may be nearing its end. On the other hand, if the price is falling but the accumulated trading volume doesn’t decline accordingly, it could indicate that the downtrend is weakening.

I use on balance volume together with Moving Average to confirm trend changes. When on balance volume starts signaling divergence, I wait for the price to break out from the MA line before entering a trade. I also use it with Bollinger Bands to find reversal points more accurately.

In simple terms, on balance volume is a tool that helps us see who is truly buying or selling. Once we understand how the accumulated trading volume looks, trading becomes much more accurate. If you’re interested in learning more or applying it to real trading, go take a look on Gate—there’s comprehensive information and analysis tools available.