What is Volume?
For crypto, Volume refers to the US Dollar amount of Bitcoin that is traded in a given time frame. It is most useful when used to confirm a trend or recent price action. A ‘confirmed’ move up would be supported by an increased volume of buying, even at higher price levels – showing that there is demand at the new price and the gains will be defended by the bulls. IfVol price increases dramatically over a few weeks but is accompanied by less and less volume this would signal that buyers are running out of power and a trend reversal could be imminent.
Price Action supported by Volume
Price Action not supported by Volume
What is OBV?
On-Balance Volume (OBV) is a single value which represents cumulative volume. It’s calculated by adding volume for days where the close is higher than the day before and removing volume on days where the close is lower than the day before. It is a refinement of the volume indicator and can be much clearer to identify price/volume divergences, hinting a trend change could be about to occur.
Price action supported by OBV
Divergence between price action and OBV
Disclaimer: Nothing within this article should be misconstrued as financial advice. The financial techniques described herein are for educational purposes only. Any financial positions you take on the market are at your own risk and own reward. If you need financial advice or further advice in general, it is recommended that you identify a relevantly qualified individual in your Jurisdiction who can advise you accordingly.