Correlation Coefficient & On-Balance-Volume

by | Nov 8, 2020

Disclaimer: Posts on the HyperTrader blog and associated HyperLinq websites are for educational and informational purposes only. These posts should not be taken as financial advice, nor are they meant to be viewed as trading advice. HyperLinq Inc. or the authors take no responsibility for any damages or losses.

When trading crypto assets, it is crucial to recognize market conditions. Crypto traders will use several technical analysis tools at the same time to better understand market conditions. This blog will discuss two technical indicators, the Correlation Coefficient & On-Balance-Volume. Thus helping crypto traders make better trading decisions in markets like BTC & ETH.

Correlation Coefficient

The Correlation Coefficient is a mathematical model that indicates the relationship between the two assets. The Correlation Coefficient tells analysts and traders how approximately one asset is similar to the other. It is accurate when both assets are prompt in the corresponding course and negative when the two securities sway in opposite directions. Defining the connection between two assets helps interpret Intermarket correlations, sector relations, and sector-market relationships. The given coefficient also helps traders diversify by classifying assets with a weak or negative association with the crypto market.

The Correlation Coefficient indicator motions within the range of negative one and positive one. However, it is not a momentum oscillator, but it switches between periods of a positive and negative relationship. The positive one is deemed a complete connection, which is considered unique. Anything within the range of zero and optimistic symbolizes that two assets flow in the corresponding direction. 

 On-Balance-Volume

Correlation Coefficient & On-Balance-Volume
The On-Balance-Volume Indicator on HyperTrader

The On Balance Volume indicator is utilized in TA to measure purchasing and selling influence. OBV is a cumulative trading tool implying that the period’s trade volume is added to the intensifying OBV total when the asset price increases. If the asset price decreases, then that period’s trade volume is deducted from the OBV total. OBV can be beneficial when doing margin trading. However, it can help scan for the usual entry and exit points of a particular crypto asset. 

With the point being outlined on a trading chart and measured numerically, the first unique quantitative rate of OBV is not applicable. OBV itself is a total, while the period continues to be set by a dedicated opening point, suggesting the original product value of OBV arbitrarily depends on the origin date. Alternatively, crypto traders and analysts view the quality of OBV changes across time; the OBV line’s inclination offers all of the weight of analysis.

Try HyperTrader for free for 7 days – no credit card required. Download now

Head of Content Marketing @ HyperLinq. His love for Chai and mountains precedes everything. Often wonders about things like, "why $1 earned through leverage feels 100x better than $1 earned selling your time?"
Head of Content Marketing @ HyperLinq. His love for Chai and mountains precedes everything. Often wonders about things like, "why $1 earned through leverage feels 100x better than $1 earned selling your time?"

Blockchain Scaling Solutions Part 2: Sidechains

Understanding the working of sidechains such as Polygon or Liquid.

Introduction to Blockchain Scaling Solutions

To understand various scaling solutions for blockchain technology, we first need to delve into the need for scaling. Well, the need for scaling solutions for any technology emerges as the network grows rapidly with the influx of millions of new users. We’ve witnessed...

What are Automated Market Makers?

In our blog series on understanding decentralized exchanges, today, we’ll dig deeper into the concept of automated market makers i.e., the foundation of decentralized exchanges (DEXs). Automated market makers (AMMs) can be said to be one of the most important...

Understanding Dapps

Dapps are a critical step in building web 3.0. So today, let’s understand what are dapps.

Ethereum Token Standards: ERC-20 & ERC-721

Let’s delve into the Ethereum token standards ERC-20 & ERC-721 and find out how they work, and what they represent.

5 Use Cases of NFTs

Everyone has heard of NFTs at least once, but what are its real-world use-cases? We find out.

Understanding Yield Farming

Let us the concept of yield farming and how to earn a passive income using this technique.

What are NFTs?

When it comes to blockchain technology, NFTs have made the biggest buzz. So what exactly are NFTs and what makes them worth so much money?

The Bitcoin Ideology

Let’s talk about Bitcoin Ideology.

Top 5 DeFi Projects

Blockchain technology is pushing the boundaries of innovation across the spectrum from solving the trust, decentralized finance, programmable money to all the way towards art ownership. Today, we’ll talk about the DeFi and specifically, the top five DeFi projects....

Blockchain Scaling Solutions Part 2: Sidechains

Understanding the working of sidechains such as Polygon or Liquid.

Introduction to Blockchain Scaling Solutions

To understand various scaling solutions for blockchain technology, we first need to delve into the need for scaling. Well, the need for scaling solutions for any technology emerges as the network grows rapidly with the influx of millions of new users. We’ve witnessed...

What are Automated Market Makers?

In our blog series on understanding decentralized exchanges, today, we’ll dig deeper into the concept of automated market makers i.e., the foundation of decentralized exchanges (DEXs). Automated market makers (AMMs) can be said to be one of the most important...

Understanding Dapps

Dapps are a critical step in building web 3.0. So today, let’s understand what are dapps.

Ethereum Token Standards: ERC-20 & ERC-721

Let’s delve into the Ethereum token standards ERC-20 & ERC-721 and find out how they work, and what they represent.

5 Use Cases of NFTs

Everyone has heard of NFTs at least once, but what are its real-world use-cases? We find out.

Understanding Yield Farming

Let us the concept of yield farming and how to earn a passive income using this technique.

What are NFTs?

When it comes to blockchain technology, NFTs have made the biggest buzz. So what exactly are NFTs and what makes them worth so much money?

The Bitcoin Ideology

Let’s talk about Bitcoin Ideology.

Top 5 DeFi Projects

Blockchain technology is pushing the boundaries of innovation across the spectrum from solving the trust, decentralized finance, programmable money to all the way towards art ownership. Today, we’ll talk about the DeFi and specifically, the top five DeFi projects....
%d bloggers like this: