Balance of Power (BOP)
The Balance of Power (BOP) is a technical indicator used by traders to assess the market's power dynamics between buyers and sellers.
It oscillates around a central zero line — values above zero signal a bullish dominance, while values below are indicative of bearish control.
Introduced to the public in 2001 by Igor Livshin through Stocks and Commodities Magazine, the BOP measures the market's buying and selling pressure by analyzing price extremes.
The formula for calculating the Balance of Power is:
Balance of Power (BOP) indicator typically fluctuates around a central line, with its values spanning from -1 to +1. When the BOP value is above zero, it reflects a market predominantly influenced by buyers. Conversely, a BOP value below zero suggests that sellers have the upper hand. A BOP at the zero mark denotes a market where neither buyers nor sellers have a distinct advantage, signifying an equilibrium in market control.
Due to its tendency to produce choppy signals, BOP is often combined with a Simple Moving Average (SMA) to smooth out its performance and provide clearer analytical insights. Despite its utility, BOP should ideally be paired with other indicators to mitigate its limitations and refine trading strategies
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