BOP Analysis & Balance of Power Trading Signals

Created by Igor Livshin

BOP indicator measures the strength of the bulls versus the bears by assessing ability of each to push price to extremes zones.

BOP Trading Indicator, Balance of Power Stock Analysis - Balance of Power Indicator

Stock Analysis and Generating Signals

When utilizing this technical analysis instrument, crossovers occurring at the zero line are the primary triggers for signal generation.

Center is marked as Zero line, levels oscillating above/below are used to generate signals.

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

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

How to Generate Buy & Sell Trading Signals

Buy Signal

When BOP crosses above 0 a buy stock signal is given.

Also when the Balance of Power 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 the indicator moving above zero line. As this will be a buy signal in bearish region and this type of market trading signal is more likely to be a whipsaw fakeout.

Sell Signal

When the BOP crosses below the 0 a sell stock signal is given.

When the Balance of Power indicator begins to decline, signaling a downward market trend, some traders interpret this as a potential sell signal. However, it is often advisable to wait for a confirmation signal, such as the indicator moving below the zero line. This ensures that the signal is stronger and avoids potential false signals within a bullish region.

Balance of Power (BOP) Indicator, Balance of Power (BOP) Indices Analysis - Balance of Power (BOP) Indicator

Sell & Buy Trading Signals

Divergence Trading

In trading, divergences between the BOP & stock trading price can be effectively used to identify the potential reversal &/or trend continuation areas in the price movement. There are different types of divergence-setups:

Classic Divergence Setup - Trend reversal signal setup

Hidden Divergence Trading Setup - Trend continuation

Indices Overbought Oversold Conditions

The Balance of Power (BOP) can facilitate the identification of potentially overbought and oversold price conditions.

Overbought Oversold levels can be used to give an early warning for potential price trend reversals.
These levels are derived & generated when indicator clusters its tops and bottoms thus setting up the overbought and over-sold levels around those values.

But sometimes, a stock can just hang out at those overbought or oversold levels and keep moving in that direction for a while. So, it's smart to wait until the Balance of Power crosses over the zero mark before jumping in.

From the picture explained below, even though the BOP said the price was too low, the price kept going down until the indicator went above the Zero Mark.

Balance of Power (BOP) Indicator, BOP Indices Analysis - Balance of Power Trading Indicator

Analysis in Indices Trade

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