How can a trader choose among the tens of thousands of equities available for trading on the stock exchange?
No, I’m not talking about the fundamental technique, in which a trader looks at the company’s financial statements, researches its past performance, and compares its price-to-earnings ratio.
Among professional stock market traders, technical analysis appears to be the most popular methodology.
Using stock charts and technical indicators, they achieve this.
A filter or exploration is devised so that they can scan for stocks that meet certain parameters, indicating that they are about to move.
Professional traders who make a living from trading have access to a wide range of trading tools, but one of the most useful is an indicator known as On Balance Volume.
Joseph Granville popularised the On Balance Volume, or OBV in short, which is actually cumulative volume, based on the premise that a similar OBV should sustain an equal price.
Short-term traders can use this indicator to identify whether there is a difference in this setting, or when OBV has already begun but price has not yet caught up, indicating that an approaching price leap is imminent.
However, how big is the upcoming leap in the horizon?
You need to make sure that if there’s an OBV outbreak and price follows in the next few trading sessions, you’ll be able to make a good margin of profit attractive enough to trade it.
An additional trading condition is added to this indicator to ensure that traders don’t miss out on big swings.
Elliot wave theory tells us that stocks’ impulsive and strong waves up occur in the 3 and 5 waves.
Investors who scan their equities with an OBV outbreak and are in the impulsive third and fifth waves, which are the longest and strongest waves, have had a lot of success in my experience.
A stock that has just seen an OBV Outbreak upwards and is currently moving in either its 3rd or 5th wave is a good prospect for a quick and substantial profit, as it is likely to run away in price within a short period of time.
And if you’d like some help with making your trading profitable, check this out.