Recently, I've been looking at how traders confirm trends and found that everyone emphasizes one issue—price movements need to be validated by trading volume to be considered legitimate. But there aren't many truly useful volume tools; On Balance Volume (OBV) is one of the indicators I use most frequently.

Speaking of OBV, this thing was actually developed by Joseph Granville in 1963. The core idea is to accumulate volume to track the true intentions of big players and institutions. Why do this? Because price is just surface-level; the real driving force lies in volume.

OBV's calculation logic is very simple—if today's closing price is higher than yesterday's, add today's volume; if it's lower, subtract volume; if unchanged, stay the same. It sounds simple, but the effect is quite good. Through this accumulated volume indicator, you can see whether funds are genuinely pushing prices higher or secretly reducing their positions.

The two main approaches I use most often are. The first is confirming trends with On Balance Volume—when prices are rising, if OBV is also accelerating upward, it indicates the rally is supported by strength, and everyone is buying. Conversely, if prices fall and OBV declines, it shows genuine selling pressure. But if prices rise while OBV stalls or declines, be cautious—this is a warning sign that the upward move may be ending.

The second approach is identifying turning points. At this time, look for divergence in OBV—if prices are making new highs but OBV isn't, or prices are hitting new lows but OBV isn't as low, this inconsistency often signals a trend reversal. I often use this to find entry points for rebounds or resistance.

In actual trading, I don't rely solely on OBV. Usually, I combine it with moving averages (MA) or Bollinger Bands. For example, when I see divergence in OBV, I wait for the price to break above the MA line or bounce off the Bollinger Band boundary—this makes the signals more reliable.

Taking Microsoft’s daily chart as an example, it was making new highs, and OBV was rising along with it—clearly a strong upward trend. But later, although the price was still testing high levels, OBV didn't make new highs—that's divergence. When the price finally touched the upper Bollinger Band and then broke below the middle line, it was a good shorting signal.

Overall, On Balance Volume helps you see the real buying and selling forces in the market. Just looking at price alone can be deceiving, but with OBV confirmation, your trend judgment becomes much more accurate. If you're also trading on Gate, try adding this indicator to your chart—it should help confirm your trading signals.