OBV For Momentum Day Trading

With 1,000′s of securities listed in the stock exchange for trading, how does a trader approach his stock selection? I am not refering to the fundamental approach where the trader studies the fundamentals of the business, and research the functioning results of the company, check its price/earnings ratios or check its balance sheets and turnover and its dividend yield.

As a whole among those people successful traders who really make a profit off by trading professionally in the stock exchanges, their preferred method seems to be the technical analysis approach.

By this, they begin using charting, and technical indicators put on to the securities. They will devise filters or explorations, to scan for securities that meet some selected indicators to show that the securities are beginning to move or have started to move.

Professional traders who trade for a living have an array of trading tools to aid them, but one of the most commonplace tools they begin using to good effect is the signal called On Balance Volume.

Popularized by Joseph Granville, the On Balance Volume or OBV in short is in reality a cumulative volume, where the underlying principle is that similar OBV need to support equivalent price. By utilizing this sign, short term traders will be in a position to identify when there is a difference in this setting, or where OBV has outbreak already but price has still lagged behind, producing the circumstance where an impending price jump is expected.

But how large is the imminent surge? Whenever there is indeed an OBV outbreak, and by inference the price need to follow in the next few trading sessions, one will also need to make sure that the impending jump is of sufficient size to warrant a good margin of profit attractive enough for him to buy.

Included in this trading signal, traders add one more trading stipulation to nail those individual giant changes. We know in Elliot wave theory that the 3 and 5 waves of any stock are the impulsive and strong waves up.

I have observed much success from traders who scan their securities with an OBV outbreak and are in their impulsive 3 and 5th waves which are their longest and strongest waves.

Armed with this understanding, when a stock is found to have just undergone an OBV Outbreak upwards and is moving within either its 3rd or 5th wave, you have an excellent candidate that will in all probability to escape in price, and letting you reap a handsome profit within a short trading period.

You can leave a response, or trackback from your own site.

Leave a Reply

Powered by WordPress | Shop Free Phones at Bestincellphones.com. | Find the best CD Rates, Checking and Fat Burning Furnace Review