BOP Analysis and Balance of Power Signals

Developed by Igor Livshin

BOP indicator measures the power of the bulls versus bears by assessing ability of each to push xauusd price to extremes areas.

Balance of Power Indicator - No Nonsense Balance of Power Indicator

Gold Analysis and Generating Signals

When using this technical indicator, the zero line crossovers are used to generate trading signals.

Center is marked as a zero line, levels oscillating above or below are used to generate signals.

Buy - The scale is marked & labeled from 0 to +100 for bullish market trend market movements

Sell - The scale is marked and labeled from Zero to -100 for bearish market movements

How to Generate Buy & Sell Signals

Buy Signal

When the Balance of Power crosses above zero a buy signal is given.

Also when the Balance of Power (BOP) is rising, the market is in an upwards trend, some traders use this as a buy signal but it's best to wait for the confirmation by trading indicator moving above the zero mark. As this will be a buy signal in a bearish territory & this type of market trading signal is more likely to be a gold whipsaw.

Sell Trading Signal

When the Balance of Power crosses below the zero a sell signal is generated.

Also when the Balance of Power (BOP) is declining, the market is in a downward trend, some traders use this as a sell signal but it's best to wait for a confirmation by moving below zero mark because this will be a sell signal in bullish territory and this type of market trading signal is more likely to be a gold whipsaw.

Is Balance of Power Indicator a Leading or Lagging Indicator

Sell & Buy Trading Signals

Divergence Trade

In gold trading, divergences between the BOP and price can be used to effectively spotting potential reversal &/or trend continuation points in price movement. There are various types of divergences:

Classic Divergence Setup - Trend reversal setup

Hidden Divergence Trading Setup - Trend continuation

Gold Overbought-Oversold Conditions

This Balance of Power (BOP) can be used to identify the potentially over-bought and oversold conditions in price movement.

Overbought-Oversold areas can be used to provide an early signal for potential trend reversals.
These levels are generated/derived when indicator clusters its tops and bottoms thus setting up the over-bought and oversold levels around those values.

However, price might also stay at these over-bought & oversold levels and continue heading in that direction for-some time & thus it is always a good idea to wait until the (BOP) Balance of Power indicator crosses over the Zero mark.

From the example shown & described below, even though the Balance of Power showed the price was oversold, price continued moving and heading downwards until the time when the indicator crossed over above the Zero mark.

How to Interpret/Analyze Balance of Power Indicator

Technical Analysis in Gold Trading

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