What is OBV ( On-Balance Volume )?

OBV is a tool I use to try to predict changes in cryptocurrency prices based on changes in volume. It is an indicator that adds the volume on up days and subtracts it on down days, showing buying and selling pressure.

When I'm analyzing a crypto and it closes with a higher price than the previous day, I consider that volume as "positive". But when it closes lower, the volume is "negative". It's that simple. But it only works in markets that have trading volume, obviously.

Joseph Granville invented this thing. The guy was obsessed with the idea that volume is everything in financial markets. He believed that prices move mainly because of volume. If a crypto suddenly has a big increase in volume, the price is likely to skyrocket or plummet.

I have used the OBV several times to identify resistance breaks, observing the closing prices. But I will be honest, this indicator can become useless when there are crazy volume spikes. In those moments, it's better to wait for the dust to settle before making a decision.

The cool thing about OBV is that sometimes you can predict trend reversals through divergences. The logic is that volume always comes before price. When OBV falls below the previous minimum, a bearish divergence forms. When it rises and closes above the last peak, we have a bullish divergence.

But don't be fooled! The OBV alone won't make you rich. It's just another tool. I've messed up trusting only it, so use it with other indicators. In reality, all these indicators are kind of a guessing game in the crypto world, where everything can change in the blink of an eye.

The market doesn't follow rules, you know? And this OBV is no exception.