OBV indicator
Description
The possibility of remote earnings today is of interest to most active users of the network. Freelancing has already become commonplace, which many of us aspire to. As a successful person, a freelancer works whenever and wherever it is convenient, while receiving good money. Binary options can also be considered a remote job, which is increasingly becoming the main source of income from a side hustle. Now this is almost the only way to get fast real money – 30 seconds after express trading.
Having tried their hand at trading, traders develop their own serious strategy in order to come to a stable income. At the heart of such work, which can lead to financial independence: testing profitable trading systems, constant search for robots, productive signals, new indicators, tracking broker ratings. You can find all this on our resource. Today we will talk about the OBV oscillator.
On Balance Volume (OBV) is a popular effective trend indicator for binary options trading, the author of which is trader Joseph Granville, who mentioned a new development back in 1963 in his work “A New Strategy in the Stock Market”. This tool accurately shows trends. Demonstrating the interests of each side of the market (bulls and bears), the indicator clearly determines whether there is support for a particular trend by the volume of players’ investments or not:
- in the event that, with a similar price behavior, OBV signals maximum values, this is a sign of a good trend with which to work,
- if, with similar price behavior, OBV signals minimum values, this is a sign that participants are not interested in the asset, which leads to a price reversal.
The indicator qualitatively determines the moments of breakouts of boundaries and discrepancies, allowing you to get a good income during trading. Its signals are easy enough to understand for both a beginner and a professional player of the exchange.
You can study the possibilities of OBV in more detail on the price chart of the MetaTrader 4 terminal in the image below. You can also easily download the MetaTrader 4 platform and learn more about how the tool works.
What is the working principle of the OBV indicator?
Modern trading pays special attention to trading volumes, which are able to show the true degree of involvement of market players. Granville was convinced that volume should be considered the main driving force of market dynamics. On Balance Volume is the difference or sum of the volume indicators.
It is this indicator that is considered one of the first and most popular for measuring positive and negative money flows. The author-developer created a special tool in order to accurately predict the main provisions of a dynamic market. The main idea of OVB lies in the idea that the change in volume indicators in advance indicates subsequent price changes.
On the chart, OBV is usually displayed in a separate window in the form of a line demonstrating the dependence of the current trend on the trading volume by its movement. Initially, the tool was developed to work on commodity exchanges and later became widespread in trading.
The formula for calculating the indicator:
If the current closing price is higher than the previous one, then:
OBV (i) = OBV (i – 1) + VOLUME (i).
If the current closing price is lower than the previous one, then:
OBV (i) = OBV (i – 1) – VOLUME (i)
If the current closing price is equal to the previous one, then:
OBV(i) = OBV(i – 1), where:
OBV (i) is the value of the On Balance Volume indicator in the current period;
OBV (i – 1) — the value of the On Balance Volume indicator in the previous period;
VOLUME (i) — volume of the current bar.
Info taken from website metatrader5.com
Indicator signals
Trend signals
- If the OBV line confirms the upward trend of the price, it is worth buying CALL options,
- If the OBV line confirms the downward trend of the price, it is worth buying put options.
Reversal signals
A sign of an emerging trend reversal will be a divergence of the charts, and if the price rises and the indicator has slowed down, it is worth closely monitoring its behavior.
- In the event of a OBV reversal in the downward direction, a downward trend occurs, it is worth buying put options,
- In the event of an OBV reversal in the upward direction, on the contrary, an upward trend arises, it is worth buying call options.
Signals of divergence of OBV with the price
- In the case of a bullish divergence that occurs on an uptrend, price highs are not confirmed by OBV data, which clearly warns of a possible trend change, it is worth buying call options,
- In the event of a bearish convergence, convergence that occurs on a downtrend, price lows are not confirmed by OBV data, which also clearly warns of a possible change in trend, you can use put options.
Do I need to install the OBV indicator in your platform?
OBV is a non-standard indicator of work on the exchange, which is not included in the main list of MetaTrader 4 tools. To try trading with it, you can download it for free here. Then, all you have to do is install the file in the MT4 platform, to do this, follow the simple instructions here.
After installing OBV in the platform, add it to the price chart, for this:
- Click the “Insert” tab in the top menu of the platform
- Select the “Custom” – “OBV” tab. In the settings, you can choose a convenient color, type and thickness of the indicator line and start working with the tool.
Application of the indicator for binary options
The balance volume, being a simple but effective technical tool, was created to accurately predict price dynamics based on data on market volumes. Today, this trend tool is quite widespread in binary options, it allows you to see a shift in the balance towards buyers or sellers and earn good money on it.
In addition to displaying the moments of the exchange trend, OBV gives high-quality leading signals of the breakdown of the levels of its borders, which are recommended to be confirmed by other instruments, including oscillators (RSI, MACD , etc.). A strong signal is considered to be a change in trend as a result of reversals. Experienced traders advise using the indicator in binary options on daily charts.
The idea of using the market volume indicator for trading largely formed the basis for the development of MFI and A/D. Being a classic of technical analysis, which every professional trader should be familiar with, OBV is justifiably considered one of the best and most reliable tools that are simple and understandable for market beginners.
Rules for concluding transactions (screenshots)
Trading with a trend signal
If the OBV line confirms the upward trend of the price, it is worth buying call options. In the image, you can see the upward trend in the MT4 terminal:
You can place a CALL bet with the Binomo broker by going to the binomo.com website and preparing an option, indicating:
- Type of option
- Expiration date
- Amount
- Prediction: up
- Next, you need to click the “buy” button and wait for the results of the forecast:
If the OBV line confirms the downward trend of the price, it is worth buying put options. In the image, you can see the downward trend in the MT4 terminal:
You can place a PUT bet with the Binomo broker by going to the binomo.com website and preparing an option, indicating:
- Type of option
- Expiration date
- Amount
- Prediction: down
- Next, you need to click the “buy” button and wait for the results of the forecast:
Trading on a reversal signal
In the event of an upward reversal of the OBV indicator, an upward trend occurs, it is worth buying call options. In the image, you can observe an uptrend in MT4 (you can place a CALL bet on the binomo.com website, the instructions are indicated above):
In the event of an OBV reversal in the downward direction, a downward trend occurs, it is worth buying put options. In the image, you can observe a downtrend in MT4 (you can place a PUT bet on the binomo.com website, the instructions are indicated above):
Trading with a signal of divergence of OBV with the price
In the case of a bullish divergence that occurs on an uptrend, price highs are not confirmed by OBV data, which clearly warns of a possible trend change, it is worth buying call options. In the image, you can observe an uptrend in MT4 (you can place a CALL bet on the binomo.com website, the instructions are indicated above):
In the event of a bearish convergence, convergence that occurs on a downtrend, price lows are not confirmed by OBV data, which also clearly warns of a possible change in trend, you can use put options. In the image, you can observe a downtrend in MT4 (you can place a PUT bet on the binomo.com website, the instructions are indicated above):
Money management
By directly determining the results of work on the stock exchange, money management is able to get the necessary income much easier and faster. First of all, new market players should get acquainted with these rules. And even if professionals are planning a stable income, it is also worth remembering the basics of money management:
Minimum capital: when working with binary options on the stock exchange, you should always set a minimum of your capital for the purchase of a specific bet; the price of one bet should not be more than 5% of the account; It is worth taking part in inexpensive options, the purchase of which will not significantly affect the size of the deposit in the event of a losing transaction. By building options trading according to these rules, you will be able to save your capital as much as possible.
Minimum deposit: working with binary options on the stock exchange, you should always take part in such transactions that can support the deposit; when buying a specific asset, you should not transfer the entire deposit to it; On the contrary, it is necessary to maintain its positive state as long as possible, because. It will always come in handy for work. By building options trading according to these rules, you will be able to maintain a positive state of the deposit for a long time.
Minimum options: working with binary options on the stock exchange, you should first purchase the minimum number of options, for example, 2-3 assets; This simple rule applies more to newcomers to the market; Having become more experienced, the trader can easily increase the number of transactions. By building options trading according to these rules, you will be able to work much more productively.
Minimum of emotions: working with binary options on the stock exchange, you should initially keep a positive attitude to serious work; It should be borne in mind that trading, first of all, is your clear decisions and analytics; It is not enough only your successful experience, it is emotionality that can bring income. By building options trading according to these rules, you can achieve much more in options.
Expiration
Expiration is the moment when trading in a specific asset ends, when exchange participants managed to set their forecasts based on strategies and tools, and now find out the effectiveness of their decisions. This is one of the basic concepts of working on the stock exchange, which can make trading much more productive.
Types of options:
- Ultra-short options – 30 seconds – 5 minutes.
- Short-term options – 10 minutes – several hours.
- Medium-term options – a day – a few weeks.
- Long-term options – a month – six months.
Is it allowed to extend the expiration?
It is allowed, but well, for all platforms. This is a convenient feature that makes it possible to extend the expiration time and reduce losses directly during trading, if the forecast is incorrectly indicated.
Expiration rules:
- If you are a new options player, start working productively with long-term trades that are more stable with a minimum of risks.
- If you are a binary options professional, try to work with expiration, which makes your trading more comfortable and productive.
- If you want to get instant income from the exchange, work with short-term transactions that will bring capital in 30 seconds.
- If you want to get a stable income from the exchange, work with long-term transactions that will bring you decent capital.
Expiration in strategies with OBV
Expiration at a trend signal
Short-term trading: allowed; with such dynamic and risky trading, the OBV oscillator shows fuzzy trend signals, so it is worth supplementing its data with trend indicators.
Medium-term expiration: allowed; OBV works best with day trading, showing good signals; It is worth checking the quality of signals using other tools.
Long-term expiration: allowed; All oscillator signals should be checked with the help of additional tools, trading strategies, and technical and fundamental analysis materials should be used in the forecast.
Expiration at a reversal signal
Short-term trading: allowed; with such risky trading, OBV shows fuzzy trend signals, so you should definitely supplement its data with trend indicators.
Medium-term expiration: allowed; OBV works best with day trading, showing good profitable signals; It is worth checking their quality with other tools.
Long-term expiration: allowed; In this case, all the signals of the oscillator should be checked with the help of additional tools, trading strategies, and technical and fundamental analysis materials should be used in the forecast.
Expiration when there is a signal of divergence between the OBV and the price
Short-term trading: allowed; the OBV oscillator perfectly determines the divergence from the price chart; It is recommended to supplement its data with other instruments when trading turbo.
Medium-term expiration: allowed; OBV, working perfectly on this interval, determines the qualitative signals of divergence and convergence; It is recommended to supplement its data with other tools.
Long-term expiration: allowed; OBV shows well the moments of discrepancies with the price; it gives productive trading; It is worth checking its data with the help of additional tools, trading strategies, using materials from technical and fundamental analysis.
When studying the possibilities of binary options, separately study the expiration, the correct use of which will allow you to quickly achieve good performance. To do this, choose a trusted broker Binomo, which offers expiration from 30 seconds to 1 day. Get to know the binomo.com website right now and trade successfully.
Downloads
MetaTrader 4 (MT4) platform – download.
OBV indicator for the MT4 platform – download.
Tagged with: Binary Options Indicator
