The Best Technical Indicators for Crypto Assets and Stocks
On-Balance-Volume (OBV)

OBV is a volume-based technical indicator. It studies the accumulated trading volume of a coin/stock for a set time frame. Simply put, it measures the coin/stock’s buying and selling pressure.
The OBV is a cumulative total of the trading volume of an asset. It takes into consideration the trading volume of the previous days, weeks, and even months. There are three simple rules to calculating OBV:

• If the asset’s price closes greater than yesterday’s closing price,

Current OBV = Yesterday’s OBV + Today’s trading volume

• If the asset’s price closes lower than yesterday’s closing price,

Current OBV = Yesterday’s OBV - Today’s trading volume

• If the asset’s price remains constant, then

Yesterday’s OBV = Today’s OBV
Interpretation of OBV is usually as follows;

• An increasing OBV means more buyers are willing to purchase the asset at the trading price. This is a good indicator of price rallying.
• A decreasing OBV means selling pressure is high. This is often found near the all-time highs as traders sell to book profits. This marks a bearish sentiment getting started in the market.

If the price movement is supported by the volume, then the trend direction is confirmed, indicating it can be relied upon to set up trades. However, if the price movement is opposite to the OBV movement, it reflects confusion in the market.
Now, to place trades solely based on OBV is not advisable. However, OBV, as a momentum indicator, is credible to rely upon to forecast breakout directions in price. Additionally, traders can leverage OBV to track the flow of money from institutional investors or the big players in the market.
Example 1

A sustained increase in the OBV levels indicates the potential breakouts in price.
Example 2

Both price and OBV fluctuate consistently. This reflects uncertainty in the market as the ultimate breakdown happens with prices falling drastically.

Accumulation/Distribution Line

We move forward with another popular volume-based indicator which is the accumulation/distribution line. It is used to assert the trend direction of an asset based on the relationship between its price and trading volume.
The A/D line measures the flow of money into and out of an asset. This is used to determine if an asset is being accumulated or distributed. Generally, accumulation implies the buying levels of the asset and distribution denotes the selling levels of the asset.
To calculate the A/D line, we need two metrics i.e.

• Money Flow Multiplier (MFM)
• Money Flow Volume (MFV)

To arrive at the metric value, here are the formulae

• MFM = [(C - L) - (H - C)] / (H - L)
• MFV = Volume for the specific period * MFM

Here,
C - Closing Price,
L - Lowest Price,
H - Highest Price, for that specific period.
Now, the A/D line is drawn at — Previous A/D Line + Current Period’s MFC. Since the A/D line is a running total, the current A/D value is added to the next day’s MFC and likewise, the A/D line continues.
Interpretation of the A/D Line is generally done in relation to the price movements of the asset. And general observations are:

• When both prices and the A/D line move upward, the bullish sentiment is likely to continue.
• If both metrics are facing a downtrend, bearish sentiment around the asset is likely to prevail.
• If prices increase while the A/D line faces a downtrend, it reflects the high selling pressure in the market. This means the asset is likely to break down and face a bearish reversal (distribution).
• Conversely, if the A/D line moves upward while prices fall, it suggests a spike in the buying pressure as more market participants continue to accumulate the asset.

The A/D line indicator is one of the best ways to confirm an existing trend while also keeping an eye out for extreme buying/selling pressure. Also, it is suggested to never use it as a standalone indicator. Using it in line with other technical aspects will enable you to be a better trader.
Example 1

This is a 6-month chart of Alphabet Inc. It shows how the A/D Line supports the bullish sentiment and the recent surge in the stock’s price follows the template.
Example 2

The price rose despite the falling A/D line reflecting the increase in selling pressure. It resulted in a huge negative breakout in price levels.