The On Balance Volumes (OBV indicator) is a cumulative indicator, which is based on trading volume and represents the relationship between trading volume and exchange rate trends.
Purpose of OBV indicator
The OBV indicator is used to determine trends and find possible points for price reversal.
Determination of trend:
1-Rising indicators prove an upward trend;
2-Falling indicators confirm a downward trend.
Signs of a trend reversal:
1-A sign of weakness in the uptrend – when the exchange rate reaches a new high but the OBV does not prove an increase, this indicates that the exchange rate may fall back;
2-A sign of weakness in the downtrend – when the exchange rate reaches a new low and the OBV does not confirm a decline, this indicates that the exchange rate may recover.