OBV Indicator
OBV indicator for MT5 best for forex trading signals using trend and volume. Define BULLISH, BEAR, and NEUTRAL price trend.
Description
The OBV indicator for MT5 means the balance volume. The indicator works on the principle that price and volume are highly correlated, and volume is ahead of price. As a result, the indicator uses the difference in volumes to calculate net volume to build the indicator. In a BULL market the indicator moves up and in a BEAR market the indicator moves down. Moreover, the indicator fluctuates if the trend is neutral. This way, forex traders can buy and sell accordingly and stay out of the way during a range market.
The indicator is best suited for beginners and advanced forex traders. New traders can spot price trends and reversals and know when to stay out of the market.
On the other hand, advanced traders can trade using several trading strategies based on trendline trading, breakout and convergence trading, and divergence trading. In addition, forex traders can download the indicator for free and install it easily.
OBV Indicator For MT5 Trading Setup
The GBPUSD H1 chart above shows the OBV indicator for MT5 in action. The indicator displays the values in a separate window as a BLUE line.
The upward movement of the indicator indicates 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 a reversal of the indicator line. However, the best stop loss is below the previous swing low.
Similarly, if the indicator moves down, it indicates a BEAR market move. Forex traders can enter a SELL position with stops above the previous swing high and take profits if the indicator line moves up.
The next method of indicator trading is drawing trend lines on both the price chart and the indicator. The price and the indicator almost simultaneously break through the trend line. This indicates a change in volumes and a change in the direction of the market, which gives a good reason to enter. In this technical trading strategy, forex traders can use the same rules to trade on a breakout of a trend line. The trend lines on the indicator and price act as support and resistance.
The indicator and the price sometimes show divergence due to the discrepancy between the price movement and the direction of the indicator. In such cases, forex traders can apply the rules of the divergence and convergence trading strategy to the indicator.
In addition, forex traders can use the indicator to trade using multiple timeframe (mtf) trading strategies. Higher price chart volume levels determine the direction of the trend on the higher time frame, so forex traders can use this direction to find the best entry point on the lower time frame.
Conclusion
The OBV indicator for MT5 provides the forex trader with BULL and BEAR trend information based on volumes. Also, it shows a neutral trend and helps the forex trader stay out of the way, which can help the trader avoid choppy markets. The indicator provides an opportunity to apply various technical trading strategies. In addition, the indicator is free to download and easy to install.