Yesterday, I had the opportunity to study about OBV or On Balance Volume, which is a very interesting indicator for traders because it helps confirm price trends with trading volume accurately.

In fact, OBV is a technical indicator developed by Joseph Granville since 1963. The main idea is that trading volume drives the price behind the scenes, not just the price movement alone. It works by accumulating the trading volume: if the closing price rises, the volume is added; if the closing price falls, the volume is subtracted; if the price remains the same, the volume does not change.

What makes OBV useful is that it allows us to see the true buying and selling pressure in the market. If the price goes up but OBV does not follow or even declines, that’s a warning sign that the price increase may not be as strong as it appears. I call this divergence.

In actual trading, OBV is a tool that makes our system more accurate. When used together with Moving Averages or Bollinger Bands, it helps us find better entry points. For example, when the JPYUSD price continues to decline along with OBV, but OBV starts not to make new lows while the price still drops, that’s a signal that we should prepare to buy.

I believe that understanding OBV helps traders not rely solely on price and trend analysis. Viewing accumulated trading volume provides a more complete perspective. Whether used to confirm ongoing trends or to identify price reversals, both are useful in developing better trading strategies.