Balance volume indicator “On Balance Volume”.
The balance sheet volume of transactions plays a huge role in Forex trading; it can only be measured with special technical tools.
One of which is the balance volume indicator or in the original name “On Balance Volume”.
Its usefulness can only be assessed when used in real trading.
This tool has been familiar to traders trading on the foreign exchange market for more than 50 years, but despite the constant changes in market trends, it has still not lost its relevance and can be useful to any Forex trader.
It’s not for nothing that the indicator can be found in most standard trading platforms.
The main task of the indicator is to timely identify a discrepancy between price and market volumes; in this case, a discrepancy is clearly visible on the chart, which warns of a possible trend reversal.
Application of On Balance Volume
The On Balance Volume indicator is not a trend forecasting tool; it follows the existing trend, so it is not advisable to use it as a signal to open trades.
Its main task is to confirm the trend or show the likelihood of its reversal, thereby allowing the trader to close the existing position in time.
Price and market volumes are always closely related; an increase in volumes always confirms the existing trend and, conversely, a decrease in volumes in most cases leads to a market reversal.
For example, there is an upward trend in the market, while the number of transactions is constantly growing, this indicates that the majority of buyers are satisfied with the existing price and they want to purchase the asset faster.
But then the price approaches the overbought zone and the volume of transactions drops sharply, a new trend begins, players try to quickly sell the previously purchased asset, thereby increasing the volume, as a result the situation repeats itself again, but only in the opposite direction.
The balance volume indicator can be installed almost immediately on the selected chart of a currency pair; from the settings, you only need to adjust the thickness and color of the displayed line and also set the price value; by default, this indicator is 0.
Trades are opened when there is a pronounced movement in the downward or upward direction.
the Forex trend indicators together with it .