OBV indicator: on-balance volume of binary options
The On-balance volume binary options’ indicator shows what volumes are being traded in the market currently. It is very important because a trader can see whether the current trend is backed by the volumes or exhausts. If the volumes weaken, then the trend is close to a reverse. If the indicator reverses after the movement up, it means that a price will reverse soon too, so a trader is recommended to buy the Put options. Otherwise, if the indicator reverses up after the movement down, then a trader has to buy the Call options.
OBV indicator: basics
The On-balance volume binary options’ indicator was developed by Joe Granville in 1963 and was initially designed for the stock markets. The indicator’s author thought that a volume appears to be the driving force of the markets. This indicator was developed in order to get information regarding volumes timely. This auxiliary tool appeared to be one of the first in its kind and used to be very popular. The main point of the indicator consists in the fact that you can predict the upcoming changes of the main trends based on the changes of volumes in the markets.
As mentioned above, the On-balance volume binary options’ indicator displays the rate of change of price and volume. According to the author’s opinion, if the growth or the decline of volumes is observed in the market and, at the same time, the price on a chart doesn’t react to these oscillations, then the market will start moving soon. This may occur because the investors invest funds into a purchase of the particular asset, while the small traders keep on selling it. For this reason, the price doesn’t react to the increase of volumes. However, when buyers begin to prevail over sellers, a price starts to move. The quick growth starts when investors are joined by other market forces.
However, the inverted effect starts sometime after that. In other words, the large investors start selling, while the small investors keep on buying. For this reason, the indicator suits well for the display of the trends’ reverses in the market. If the line of the On-balance volume binary options’ indicator grows, then volumes in the market grow too. At the same time, if a price grows too, then the indicator confirms that there is the ascending trend in the market.
How to apply the OBV?
Trading using this indicator is pretty simple. However, the line itself doesn’t send signals for work. It can be used only to confirm signals of the other indicators. It’s important to note that the numerical expression of the binary options’ indicator is not as important, as a direction of the line.
For the binary options’ trader, it is very important to know a direction of the indicator’s line, as well as whether this line moves in the same direction as a price. For example, if the price on a chart grows quicker than the indicator’s line, it means that the trend is not backed by volumes. In other words, the trend’s peak is very close, and then the reverse in the opposite direction will occur.
The change of the current trend is the only one signal that is sent by the On-balance volume indicator. It is assumed that if the change of the trend has occurred on the indicator, then the trend will be changed on the price chart too. When the indicator starts to reverse down after a growth, a trader may start considering the purchase of the Put option. If the indicator starts reversing up after the long movement down, then you can buy the Call option.
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