OBV Indicator

OBV Indicator

OBV indicator for MT4. Best forex trading signals using trend and volume. Identify BULLISH , BEARISH, and NEUTRAL price trends.

The OBV indicator for MT4 stands for On Balance Volume. The indicator works on the principle that price and volume are highly correlated and volume precedes the price. As a result, the indicator uses the difference in volumes to calculate the net volume to plot the indicator. In a BULLISH market, the indicator moves higher and in a BEARISH market, the indicator moves lower. Moreover, the indicator ranges if the trend is neutral. So, forex traders can place BUY and SELL accordingly and be on the sidelines during a ranging market.

The indicator works best for new and advanced forex traders. New traders can identify the price trend and reversals and also know when to stay away from the market. On the other hand, advanced traders can trade using multiple trading strategies based on trend line trading, breakout trading and convergence, and divergence trading. Additionally, forex traders can download the indicator for free and install it easily.

OBV Indicator For MT4 Trading Setup

The above GBPUSD H4 chart shows the OBV indicator for MT4 in action. The indicator displays the values in a separate window as a BLUE line.
The upward movement of the indicator denotes a BULLISH price trend, so forex traders can place a BUY trade. The best take profit point is to look for a weakening of the indicator values or at the reversal of the indicator line. However, the best stop loss is below the previous swing low.

Similarly, if the indicator moves downwards it indicates a BEARISH market movement. Forex traders can enter a SELL position with stops above the previous swing high and book profits if the indicator line moves upwards.

The next method to trade the indicator is by drawing trend lines to both the price chart and the indicator. Price and the indicator tend to break the trend line almost simultaneously. This indicates the shift in volumes and the change in market direction providing a strong and valid case for an entry. In this technical trading strategy, forex traders can use the same rules of trend line breakout trading. The trend lines on the indicator and price act as support and resistance.

The indicator and price sometimes show a divergence due to a mismatch in the price movement and indicator direction. In such instances, forex traders can apply the divergence and convergence trading strategy rules to the indicator.

Moreover, forex traders can use the indicator to trade using multi-time frame ( mtf ) trading strategies. The volume levels of a higher price chart provide the trend direction on a higher time frame, so forex traders can use this direction to find the best entry point in a lower time frame.

Conclusion
The OBV indicator for MT4 provides the forex trader’s BULLISH and BEARISH trend information based on the volumes. Furthermore, it shows the neutral trend and assists the forex trader to stay on the sidelines which can assist the trader to avoid choppy markets. The indicator provides the opportunity to apply various technical trading strategies. Additionally, the indicator is free to download and easy to install.