OBV Divergence Indicator On-Balance Vol Reversal

The OBV Divergence Indicator On-Balance Vol Reversal tool tracks cumulative volume flow to identify discrepancies between price action and market momentum, signaling potential trend reversals.

Usage

The tool is primarily used to identify market turning points by detecting divergences between price and the On-Balance Volume (OBV) line.

• Bullish Divergence: Occurs when the price makes lower lows while the OBV line makes higher lows. This suggests that despite falling prices, buying pressure is increasing, often preceding an upward reversal.
• Bearish Divergence: Occurs when the price makes higher highs while the OBV line makes lower highs. This indicates that buying pressure is waning despite the rising price, suggesting a potential downward reversal.

The indicator includes visual labels (+RD for Bullish, -RD for Bearish) and connecting lines on the chart to clearly mark where these events occur. Additionally, a comprehensive dashboard provides real-time data on divergence quality and consecutive occurrences.

Details

The indicator calculates On-Balance Volume by adding volume on up-days and subtracting it on down-days. It utilizes pivot highs and lows (fractals) to identify significant peaks and troughs in both price and OBV. To ensure signals are relevant to the current trend, it incorporates a 50-period EMA filter, only identifying bullish signals in localized downtrends and bearish signals in localized uptrends.

The "Divergence Quality" feature categorizes signals based on their frequency:

• Normal: A single divergence occurrence.
• Good: Two consecutive divergences.
• Strong: Three or more consecutive divergences, indicating a high probability of momentum exhaustion.

Settings

Logic Setting

• Fractal Periods: Determines the number of bars used to detect pivot points. A higher value identifies more significant, long-term swings, while a lower value identifies more frequent, short-term turns.

Display Setting

• Show Table: Toggles the visibility of the on-screen dashboard containing divergence statistics.
• Show Label: Toggles the chart labels (+RD/-RD) that appear at the point of divergence detection.

FAQ

How do I access the OBV Divergence Indicator On-Balance Vol Reversal?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What does "Change Phase Indicator" mean in the table?

This indicates whether a phase change (a shift in momentum direction) has been detected between the two peaks or troughs forming the divergence.

Can I use this for intraday trading?

Yes, the indicator scales across different timeframes. However, adjusting the "Fractal Periods" may be necessary to filter out market noise on lower timeframes.