On-Balance Volume (OBV) is a technical analysis tool used by traders to gauge the momentum of a given asset. It was created in 1963 by Joe Granville and it measures the buying and selling pressure of an asset by comparing the volume traded with price movements. OBV attempts to predict future price movements based on current trading volumes.
The OBV indicator is calculated using cumulative volume data, which adds up all prior periods’ values of total trading volume over time. If today’s closing price is higher than yesterday’s closing price then the day’s total trading volume will be added to the total value; if today’s closing price is lower than yesterday’s then that amount will be subtracted from the running total. The resulting number can then be plotted onto a chart for easy reference when making investment decisions.
OBV can help identify potential breakouts before they occur as well as signal trend reversals ahead of time – two important aspects for any trader looking to make educated decisions about their investments. Traders may also use this information alongside other indicators like Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD), or Bollinger Bands for further confirmation before entering into positions .
When combined with other technical analysis tools, On-Balance Volume can provide insight into how active institutional investors are in driving market prices – allowing individual traders and investors alike to gain an edge in their decision making process while investing in cryptocurrencies or other assets.
