The OBV – On balance Volume MetaTrader indicator uses the volume to identify the bullish, bearish or neutral price trend. Most forex traders overlook the role of volume in determining the price trend. However, this indicator operates on the principle that volume precedes price movement. In other words, the volume dictates the price movement and an increase in volume are often followed by a series of price movements.
Features of OBV MT4 Indicator
The indicator calculates the net volume between the bids and asks at any given time. This oscillator plots the volume as a blue indicator line in a separate window.
If the indicator line moves upwards it indicates a bullish trend, while the downward movement shows a bearish trend. However, it is interesting to note that during neutral or flat market conditions the indicator line tends to reflect the same.
Since this oscillator reflects the market movements, forex technical traders can draw trend lines on the indicator. As a result, traders can identify the beginning of a trend reversal and buy or sell accordingly. Furthermore, these trend lines on the indicator acts as support and resistance and helps traders to stay in the trend until an opposite trading signal.
Benefits of OBV MT4 Indicator
The most important benefit is the reflection of bullish, bearish and neutral trend by the indicator. As a result, traders can deploy trading strategies to accommodate the trending or ranging market conditions.
Traders can use the volume information from this indicator and trade in confluence with other indicators for additional confirmation. It helps traders to add volume into the existing technical analysis and understand the markets in a wider perspective.
This oscillator works well in all intraday price charts as well as the daily, weekly and monthly forex charts. So, traders across the spectrum can use it to trade.
Indicator Settings Description
ExtOBVAppliedPrice: Determines the price used to calculate the OBV.