OBV Divergence Indicator
OBV Divergence offers high-yield forex divergence buy-sell signals for MT5 users. Best suited for automatic technical support when setting up divergence. Suitable for MTF charts
Description
OBV Divergence is an automatic indicator of balance volume divergence. It demonstrates both classic and hidden divergence signals on MT5 forex charts.
Divergence is an advanced trading method that is mainly suitable for intermediate and expert traders. For beginners, consistently identifying irregularities between price and volume movements can be critical. Thus, the Auto Divergence Detector can always be a handy tool for amateur and busy traders to try out this famous Forex trading technique.
The OBV Divergence indicator clearly identifies the opposite behavior between price and on-balance volume changes. Fortunately, you don’t have to differentiate between bullish and bearish divergences on your own. This indicator uses arrow signals to confirm whether it is a bullish or bearish divergence. So, you only need to react to the indicator’s trade alert and follow the direction of the arrow to place a trade based on the divergence.
How to trade forex divergences using the OBV Divergence indicator in MT5?
The OBV Divergence indicator strictly follows the normal and hidden divergence rules to predict trading opportunities.
In the chart above, the indicator recorded three divergence setups. In the first case, price makes a lower high while OBV makes a new high. According to the hidden divergence rule, this is a sell signal. The arrow at the top of the indicator window points down, signaling an upcoming bearish trend.
The second installation shows a different scenario. Here the price makes a higher high when the indicator shows a lower high. This is another sell signal based on the usual or classic divergence rules.
Finally, in the third setup, price makes a higher low while OBV makes a lower low. This is a hidden divergence signal indicating that the price is preparing for a bullish trend.
Conclusion
Divergence trading is one of the most effective methods of identifying buy and sell signals in the Forex market. Apart from OBV, other indicators such as RSI, Stochastics and MACD are also popular for determining divergence settings. However, on-balance volume gives you a better idea of the direction of the future trend. Moreover, the OBV Divergence indicator clearly shows asymmetrical price movements, making divergence trading more convenient for beginner level traders.