Balance of Power (BOP) Overview

The Balance of Power (BOP) is a momentum indicator that measures the strength of buyers versus sellers in a market. Developed by Vitaly N. Katsenelson, the BOP helps traders identify the strength of a trend and potential reversals by assessing the pressure exerted by buyers and sellers over a specific period.

Key Features of the Balance of Power:

• Trend Strength Measurement: Provides insights into the buying and selling pressure in the market.
• Potential Reversal Detection: Can signal potential trend reversals when the balance shifts from buyers to sellers or vice versa.
• Easy Interpretation: The BOP indicator is straightforward and provides a visual representation of market strength.

Calculation of the Balance of Power

The Balance of Power is calculated using the following formula:

Where:

• $Close$: The closing price of the period.
• $Open$: The opening price of the period.
• $High$: The highest price during the period.
• $Low$: The lowest price during the period.

Using the Balance of Power

To effectively analyze the Balance of Power, follow these steps:

1. Load the Chart for the Asset:

   • Open the platform.
   • Load the chart for the specific asset you wish to analyze.

2. Set the Timeframe:

   • Choose an appropriate timeframe for your analysis (e.g., daily, hourly). The BOP can be applied to various timeframes.

3. Add the Balance of Power Indicator:

   • Navigate to the Indicators section on the platform.
   • Search for Balance of Power in the list of available indicators.
   • Click on the BOP to add it to your chart. It will appear in a separate panel below the main price chart.

4. Interpret Signals:
   • Above Zero: A BOP value above zero indicates that buyers are in control and that buying pressure is stronger than selling pressure. This typically signals a bullish trend.
   • Below Zero: A BOP value below zero indicates that sellers are in control, and selling pressure is stronger than buying pressure, suggesting a bearish trend.
   • Divergence: Look for divergences between the BOP and price movements:
     • If prices are rising, but the BOP is falling, it may signal a weakening bullish trend and a potential reversal.
     • If prices are falling, but the BOP is rising, it may indicate a weakening bearish trend and a potential reversal.