Master the "Smart Money" flow indicator. Learn how On-Balance Volume (OBV) uses volume as a leading indicator to predict future price moves before they happen.
On-Balance Volume (OBV) is a technical indicator that uses volume flow to predict changes in an asset's price. The core idea behind OBV is that volume precedes price. By adding volume on "up" days and subtracting volume on "down" days, OBV creates a cumulative line that can show whether institutional money is flowing into or out of a stock, often before the price chart itself makes a significant move.
Because volume is the "energy" behind the price. If the OBV starts moving in a certain direction while the price is still stuck in a range, it implies that the "Smart Money" is already positioning themselves, acting as a precursor to the eventual price breakout.
OBV is most effective on Daily or Weekly timeframes where institutional volume patterns are clearer and less susceptible to the "noise" of intraday algorithmic high-frequency trading.