Introduction
This script enhances the classic On-Balance Volume (OBV) indicator by integrating customizable moving averages (MA) and Bollinger Bands (BB). Designed by Marius1032, it provides traders with advanced tools to identify volume-driven momentum, trend strength, and potential reversal signals.
Key Features
- OBV-Based Trend Tracking: Measures cumulative buying/selling pressure.
- Smoothing Options: Supports SMA, EMA, RMA, WMA, VWMA for refined analysis.
- Bollinger Bands: Overlay with SMA to gauge volatility and price extremes.
Core Components Explained
1. On-Balance Volume (OBV)
Purpose:
- Tracks volume flow to predict price momentum.
Calculation:
- Up days: Volume added to OBV.
- Down days: Volume subtracted.
Interpretation:
- Rising OBV → Bullish momentum.
- Falling OBV → Bearish momentum.
- Divergence (e.g., price makes lower lows while OBV rises) → Potential reversal signal.
2. Moving Averages (MA)
Purpose:
- Smooths price data to highlight trend direction.
Combination with OBV:
- MA crossovers on OBV line → Trend reversals/continuations.
- Example: OBV crossing above its 20-period SMA → Confirms uptrend.
3. Bollinger Bands (BB)
Purpose:
- Measures volatility and identifies overbought/oversold conditions.
Structure:
- Middle line: SMA (typically 20-period).
- Upper/lower bands: ±2 standard deviations.
Combination with OBV:
- Price touches lower BB + rising OBV → Accumulation signal.
Trading Strategies
Breakout Confirmation
👉 How to Trade Breakouts with OBV and BBs
- Signal: Price breaks upper/lower BB.
- Confirmation: Rising/Falling OBV aligns with breakout direction.
Trend Reversals
- Bullish Reversal: Price at lower BB + OBV shows higher low.
- Bearish Reversal: Price at upper BB + OBV shows lower high.
Volume-Weighted Trends
- Strong uptrend: Price near upper BB + OBV rising steadily.
FAQs
Q1: Can OBV be used alone for trading decisions?
A1: While OBV is powerful, combining it with MA/BBs reduces false signals.
Q2: Which moving average works best with OBV?
A2: EMA (20-period) is popular for its responsiveness to recent volume changes.
Q3: How do Bollinger Bands improve OBV analysis?
A3: BBs add volatility context, helping distinguish between strong trends and reversals.
Conclusion
This OBV-MA-BB hybrid tool offers a data-driven approach to trading. By correlating volume trends with price volatility, traders gain actionable insights—whether scalping breakouts or spotting reversals.
👉 Master Advanced Volume Analysis
Created by Marius1032. Not financial advice. Always backtest strategies.
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