The On Balance Volume (OBV) is a popular technical indicator used in financial analysis to measure the cumulative buying and selling pressure behind a financial asset. It tracks the volume of trades and assigns a value based on whether the price closes higher or lower than the previous day. The OBV indicator is plotted as a line on a price chart. When the price closes higher than the previous day's close, the volume of that day is added to the OBV. Conversely, when the price closes lower, the volume is subtracted from the OBV. If the price remains unchanged, the OBV stays the same.

The concept behind OBV is that volume often precedes price movements. When the OBV line is trending upwards, it suggests that buying pressure is stronger, potentially indicating an uptrend in the price. Conversely, when the OBV line is trending downwards, it suggests that selling pressure is stronger, potentially indicating a downtrend in the price.

Traders and investors use the OBV indicator to confirm the strength of a price trend, identify potential trend reversals, and spot divergences between the indicator and the price chart. Divergences occur when the price makes new highs or lows, but the OBV fails to confirm these moves, potentially signalling a trend reversal.

It's important to note that the OBV should be used in conjunction with other technical analysis tools and indicators to confirm trading signals and make well-informed decisions. Like any indicator, it has its limitations and should not be relied upon in isolation. By understanding the OBV indicator and its interpretation, novice traders and investors can gain insights into the buying and selling pressure behind a financial asset, helping them make more informed trading decisions.