On-Balance Volume (OBV) Divergence Indicator for MT4 Download - Free - [TFLab]

The Automatic On Balance Volume Divergence (OBV Divergence) Indicator is part of the momentum technical indicators series in MetaTrader 4 that automatically detects divergences between trading volume and price. It allows traders to identify these divergences and potential trend reversal points without manual analysis. This oscillator marks buy signals in blue and sell signals in pink.

Indicator Table

In the image below, the price chart of Sugar with the symbol [SUGAR] is shown in a 1-hour timeframe. At the end of a downward correction, the last low is lower than the previous low (LL), but the OBV Divergence curve is rising, showing a bullish (positive) divergence. In this situation, a buy signal is displayed on the chart. Similarly, at the end of an uptrend, the last high goes beyond the previous high (HH), but the indicator curve is decreasing, showing a bearish (negative) divergence. In this condition, a sell signal is issued, indicating a reversal from an uptrend to a downtrend.

Overview

The Automatic Divergence Indicator (OBV Divergence) is a technical analysis tool that identifies potential market trend changes by detecting discrepancies between the indicator's direction and the price. Comparing trading volume with price changes identifies the flow of incoming and outgoing funds, making divergences a good indicator for trend reversals.

Buy Signal (Buy Position)

In the image below, the price chart of Silver with the symbol (XAGUSD) is shown in a 1-hour timeframe. The price registers a new lower low at the end of a downtrend, but the indicator curve is rising. This condition indicates buying pressure and the possibility of a trend reversal to the upside, and the indicator displays a buy signal on the chart.Top of FormBottom of Form

Sell Signal (Sell Position)

In the image below, the price chart of Bitcoin with the symbol (BITCOIN) is shown in a 1-hour timeframe. At the end of an uptrend, the price registers a new higher high, but the indicator curve is decreasing. This situation indicates selling pressure and the possibility of a trend reversal to the downside, and the indicator displays a sell signal on the chart.

Settings of the OBV Divergence Indicator

• OBV Period: The OBV period is set to 14.
• Number of candles for Pivots calculation: The number for pivot calculation is set to 8.
• Maximum distance between two pivots: The maximum distance between two pivots is 30.
• Minimum distance between two pivots: The minimum distance between two pivots is 5.
• Number of divergences from pivot: The number of divergences from each pivot is 1.
• Number of OBV that break the line: The number of RSI line breaks is set to 2.
• Shift: The shift is set to 2.
• Sell_Divergence: Set the color for sell signals to pink or any color you choose.
• Buy_Divergence: Set the color for buy signals to blue or any color you choose.
• Width: The width of the divergence line can be set to 2.

Summary

The OBV Divergence Indicator is a technical analysis tool that identifies divergence points between price and trading volume across various timeframes. Divergences occur when the price and OBV indicators move in opposite directions. OBV divergences can provide solid signals for potential trend changes. However, this indicator may generate false signals in range-bound markets, so it is best used in trending markets.