On Balance Volume Indicator MT4 | MT5

The On Balance Volume is a classic volume-based indicator developed by Joseph Granville. It adds the current period's volume to a cumulative total when the price closes higher than the previous close, subtracting it when the price closes lower. If the close is unchanged, the OBV stays the same.

• If close > previous close: OBV = OBV (previous) + volume
• If close < previous close: OBV = OBV (previous) - volume
• If close = previous close: OBV = OBV (previous)

Furthermore, traders often use this indicator in several trading strategies, depending on the market situation:

1- Trend confirmation:

• Bullish Signal: OBV is rising along with price, confirms that buying pressure supports the uptrend.
• Bearish Signal: OBV is dropping along with price, confirms that selling pressure validates the downtrend.

2- Potential reversal:

• Bullish Divergence: Price makes lower lows, during a downtrend, while OBV makes higher lows, suggests weakening selling pressure and a possible upward reversal.
• Bearish Divergence: Price makes higher highs, during a bullish trend, while OBV forms lower highs, indicates that buyers are losing strength and a potential downward reversal may occur.

3- Breakouts:

• Bullish Breakout: OBV breaks above a previous high before price, signals an upward continuation.
• Bearish Breakout: OBV breaks below a previous low before price, suggests a downward continuation.

1/ When the OBV indicator is applied to the USDJPY chart, it moves downward in line with the price during the downtrend, confirming strong selling pressure and signaling a short opportunity. Toward the end of the trend, while the price continues to make lower lows, the OBV forms higher lows, indicating weakening momentum and a potential bullish reversal.

This is reflected on the MT4 chart. In such a scenario, traders should consider closing short positions upon spotting bullish divergence and look for opportunities to enter long.

2/ When the OBV indicator is applied to the AUDNZD chart, it moves upward in line with the price during the bullish trend, confirming strong selling pressure and signaling a long opportunity. Toward the trend's end, while the price continues to make higher highs, the OBV shows lower highs, suggesting weakening momentum and a potential bearish reversal.

This is illustrated on the MT5 chart. In such a scenario, traders should consider closing long trades upon spotting bearish divergence and look for opportunities to enter short.

3/ In the CADCHF chart example on MetaTrader 4, during the bearish trend, a brief upward movement in price may suggest a hesitation phase, leaving traders uncertain whether it’s a true bullish reversal or a correction. However, the OBV indicator provides early confirmation of a bearish continuation, as its line breaks below the previous low. This signals sustained selling pressure, suggesting that traders should consider holding their short positions or even adding to them.

4/ In the EURGBP chart example on MetaTrader 5, during the bullish trend, a brief downward movement in price may suggest a hesitation phase, leaving traders uncertain whether it’s a true bearish reversal or a correction. However, the OBV indicator provides early confirmation of a bullish continuation, as its line breaks above the previous high. This signals continuatied buying pressure, suggesting that traders should consider holding their long trades.