Balance of Power

The Balance Of Power is an Oscillator Indicator invented by Igor Livshin. The explanation that Lisvin gives for his indicator is: "the balance of power (BOP) indicator measures the strength of the bulls vs. bears by assessing the ability of each to push price to an extreme level." The BOP brings out hidden patterns of accumulation or distribution.

Calculation
BOP = (Close price - Open price)
(High price - Low price)
Signals

We can explain BOP trading signals with three techniques:

1. Trend Direction:

  • When the BOP is above zero a buy signal is given and also there is an upward trend for prices
  • When the BOP is below zero a sell signal is given and also there is a downward trend for prices

2. Divergence: There are several type of divergence between BOP and prices.

Classic Divergence

  • Bullish Divergence: Lower lows in price and higher lows in BOP
  • Bearish Divergence: Higher highs in price and lower highs in BOP

Hidden Divergence

  • Bullish Divergences: Lower lows in BOP and higher lows in price
  • Bearish Divergences: Higher highs in BOP and Lower highs in price

3. Overbought or Oversold Conditions

The BOP can be used to find the overbought or oversold condition in price movements through observation.

Traders can set overbought and oversold levels based on the indicators highest and lowest point