Balance Of Power (BOP)
Balance of power (BOP) is a technical indicator that measures the strength of the selling and buying pressure. Technical analysts use this indicator to identify the buy or sell signals. KEEV makes the process of using CCI super easy for users.
In This Article -
- What is the Balance of power?
- How to analyze charts using the Balance of power?
- How to use Balance of power?
Category – Trend
Type – Leading
What is the Balance Of Power?
Balance of power (BOP) is a technical indicator that evaluates the strength of buyers and sellers in the market. Technical analysts use this indicator to measure price trends and identify the Overbought or Oversold Conditions in the market.
In an article in Technical Analysis of Stocks & Commodities in August 2001, Igor Levshin introduced the concept of Balance of payments. It stated that this indicator compares buyers' ability to move prices upwards with sellers' ability to lower them.
You can calculate the BOP by using the formula below:
BOP = (Close price – Open price) / (High price – Low price)
How to analyze charts using the Balance Of Power?
Using BOP you can interpret:
Buying and Selling signals
Trend
BUYING AND SELLING SIGNALS
You can see that the BOP oscillates between -1 and +1 in the entire chart.
When you notice that the BOP is negative or below 0, it indicates that the traders are selling their stocks thinking that the price will decrease in the future.
On the other hand, when you notice the BOP is Positive, it indicates the traders are purchasing the stocks thinking that the market price will increase in the future.
Is nearing Zero, which indicates that the strength of both buyers and sellers is getting equivalent.
The BOP indicates a buying signal when it turns more than Zero or positive.
The BOP indicates a selling signal when it turns less than Zero or negative.
TREND
If the BOP line rises, this indicates an upward trend, whereas if it falls, it indicates a downward trend. It confirms the trend change when the zero-line crosses over.
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