Chart Decoder Series: Volume + OBV – The Smart Money Tracking System

Key Points

1. OBV is a cumulative indicator that tracks buying and selling pressure based on closing prices, with volume added or subtracted depending on price movements.

2. Volume indicates the strength of a move, while OBV shows accumulated buying or selling pressure over time, helping identify trends and accumulation/distribution phases.

3. Key patterns include confirmed uptrends (rising OBV + high volume + rising price), accumulation zones (rising OBV + low volume + sideways price), and distribution phases (falling OBV + high volume + falling price).

4. Divergence between OBV and price can signal potential reversals, and breakout confirmation occurs when OBV rises with spiking volume and price breaks key levels.

5. OBV works best when combined with other indicators like Bollinger Bands or VWAP, and its effectiveness varies in choppy markets or during news events.