Volume and On-Balance Volume

Question 1

Volume

Answer 1

Displayed beneath the price chart, it is a secondary indicator and confirms price and time data. It is a measure of the market aggression.

Question 2

On balance volume

Answer 2

Displayed as an oscillator, it has no upper or lower boundary.

Question 3

How is on balance volume

Answer 3

Each day’s total volume is deemed positive or negative, depending on the close relative to yesterday. The day’s volume then added to (or subtracted from) the previous day’s OBV

Question 4

OBV interpretation

Answer 4

• unlike RSI and stochastics, OBV value is not important
• we need to look at OBV direction relative to price direction
• OBV changes precede price changes
• higher OBV now than last time the price was at that level indicates a potential upward trend
• chart analysis can be applied to OBV

Question 5

What can OBV tell us in a sideways market

Answer 5

• rising OBV in a sideways market suggests an upside breakout is imminent
• falling OBV in a sideways market suggests an downside breakout imminent

Question 6

What does a breakout in OBV suggest

Answer 6

There will be a breakout in price