Balance of power indicator

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Balance Of Power Indicator Formula, Setup And Usage

Balance Of Power indicator or BOP measures the power that the buyers and sellers have. It’s a very volatile indicator. It goes up and down very often. It also determines market strength by assessing the strength of total buyers against that of total sellers and their ability to drive the price to extreme ends.

More on the Balance of Power Indicator

The BOP is an indicator, and typically not an oscillator. BOP moves along a zero line. When the balance of power indicator is above zero lines, it indicates buyers are in control. Similarly, when BOP goes below the zero lines, it shows sellers are strong. There are divergences also. Divergences are of two types, regular and hidden.

Balance Of Power indicator Formula

The formula or calculation of the BOP is (CLOSE – OPEN) / (HIGH – LOW)

How to set up Balance of Power Indicator on the charts?

Setting up the BOP on Zerodha Kite

The BOP indicator is present in the Studies section in Zerodha Kite. Open up your favorite stock chart and attach the indicator by accessing the Studies section. Here you can choose the parameters you want to use for the BOP indicator.

By default, BOP considers a 14-day period and a simple moving average. But the default parameters can be modified as per own demand. You can increase or decrease the period. Instead of the simple moving average, you can choose other types of moving averages. There are Exponential, Time-Series, Triangular, Variable, VIDYA, Weighted, Welles Wilder, Hull, Double Exponential and Triple Exponential types of MA also. Here the indicator oscillates between +1 and -1.

Setting up the BOP on Upstox Pro

The Balance of Power indicator is also available on the Upstox Pro platform. Similar kinds of setting like Zerodha here too can be applied on the charts.

How to trade using the Balance of Power Indicator?

  • The BOP indicator works almost in all the time frames.
  • As can be seen in the picture below, a buy position is created when the BOP indicator goes up from below the zero line indicating price reversal.
  • The buy position is closed when the BOP indicator tops above zero line and starts coming down accompanied by a downward movement of price.

The Zero Line Reject

We can see the zero line can act as a good support or a resistance. In case of a strong trend in the market, the Balance of Power Indicator founds great support or resistance near the zero line. It tests the zero line and could not sustain there and either falls back (sell) or rises up (buy). This can trigger a pullback entry with low risk and high return. This strategy is similar to the ZLR in the Woodie CCI indicator. Watch the image below for a perfect short sell setup.

Here I have used a Hull Moving Average (HMA) for confirming the trend. When the price is moving below the HMA the trend is down. Now if the BOP tests the zero line but could not stay there and falls down it is a low-risk entry in the short sell trade. A similar strategy can be used for a buy setup too. Instead of the HMA, you can also use SuperTrend for confirming the trend.

Trading the Balance of Power Indicator Divergence

The BOP can also spot divergence nicely on the charts. Whenever the price move up and makes a new high but the BOP can’t make new highs it is a negative divergence. Similarly, when the price moves down and makes new lows but the BOP is unable to make new lows it is a positive divergence. The divergence can indicate a probable change of trend. You can enter a trade in the opposite direction using any trend line break.

Trading as an overbought oversold indicator

The Balance of Power indicator can sometimes be traded as an overbought oversold indicator too. For this, we have checked some historical levels. We have noted that the BOP dipping close to -0.5 triggers major rallies in the Nifty index.

As an example on 18th November 2020, the BOP dipped close to -0.5 in the daily charts. This triggered a major rally that lasted for the next 22 months before any significant correction. Once again the BOP dipped close to -0.5 at the end of day charts on 5th October 2020. That again formed a bottom and market rallied a lot till the last high. Watch the image below.

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Conclusion

The Balance of Power Indicator oscillates between +1 and -1 in the Zerodha Kite platform. Traders can use this indicator for a buy signal and sell signal as per the zero line cross. Some low-risk pullback entries can also be taken using the zero line reject strategy. Another kind of trading this indicator is to follow its divergences. Sometimes, this indicator can also be traded as an overbought oversold indicator specially in the Indian indices.

Author: Indrajit Mukherjee

Indrajit is a professional blogger and trading system developer. Amibroker expert, WordPress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely. View all posts by Indrajit Mukherjee

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Balance of Power Indicator

Balance of Power Indicator is best known as a trend oscillator which can detect the market trends and generates trade signals at the same time. The signals are demonstrated in a very simple way that enables traders with any level of experience can understand them.

Balance of Power Indicator offers great flexibility in trading life since it can be applied to trade all kinds of forex currency pairs listed in the MT4 trading platforms. Furthermore, this tool is a good match for all sorts of timeframe charts.

Balance of Power Indicator: Explanation

After the installation, when you load the Indicator at you MT4 terminal, you’ll find your chart like the following image

Balance of Power Indicator applies a dual smoothed MA system over the selected period of data and transforms the information into trade signals. Its bars turn positive means the trend is bullish and it’s Moving Average line moves above the zero levels is considered as the confirmation of buy entry signal.

For sell entry, the bars must be turned as negative and the Moving Average line should be moved below the zero levels. The usual Risk to Reward ratio for each trade should be 1:2. Although, you may take the opposite signal to your trade as an exit signal at any point of the market momentum.

Balance of Power: Trading Rules

Buy Entry

  • The Indicator bars turn positive
  • The Moving Average line remains above the zero level
  • Buy triggers when both of the above conditions are met
  • Set stop loss below the current low of the market
  • Exit long/take profit whenever the indicator bars turn negative

Sell Entry

  • The Indicator bars turn negative
  • The Moving Average line moves below the zero level
  • Sell triggers when both of the above conditions are met
  • Set stop loss above the current high of the market
  • Exit short/take profit whenever the indicator bars turn positive

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Индикатор MIT Balance – определение важных внутридневных уровней котировок

Оглавление. Жми для простмотра

Для создания индикатора форекс требуется отличное понимание рыночных правил, методов перевода их в алгоритм и его реализация в программном коде. Поэтому работу над эффективным инструментом теханализа, как правило, проводит группа специалистов, объединенная в организацию. Примером такой консолидации профессионалов является компания MIT System, продукт которой, называющийся индикатор MIT Balance, скачать у нас можно бесплатно.

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Как работает MIT Balance

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Лучший брокер

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Базируется он на предположении, что котировка постоянно стремится к некоему балансному уровню (его характерная особенность – равенство объемов заявок на покупку и продажу). Именно этот равновесный уровень и рассчитывается индикатором MIT Balance (расчет производится в самом начале торгового дня – в 00:00). Дополнительно вычисляются (рис. 1):

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  • наиболее оптимальные уровни совершения сделок (для этого используются формулы из теории Ганна);
  • зоны ценового разворота (границы рынка);
  • неторгуемые зоны.

Как использовать MIT Balance

Балансный уровень используется для размещения на нем ТейкПрофитов отложенных лимитных ордеров, которые размещаются на рассчитанных оптимальных уровнях совершения сделок (СтопЛосс размещается на следующем оптимальном уровне). Не сработавшие лимитные ордера удаляются при:

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  1. завершении текущего торгового дня;
  2. достижении ценой балансного уровня.

Зоны ценового разворота могут использоваться для торговли на отбоях. Для этого отложенные ордера размещаются под такой зоной, если текущая котировка ниже нее, или над такой зоной, если котировка выше нее.

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Не торгуемые зоны, определяемые индикатором MIT Balance, указывают ценовой диапазон, в котором совершать сделки в течение текущего торгового дня не рекомендуется (поскольку потенциальная прибыль меньше возможных убытков).

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Сигналом наиболее благоприятного момента входа в рынок является образование на ценовом графике канала. После совершения сделки необходимо регулярно мониторить цену (особенно при торговле на младших таймфреймах) и при первых признаках ее разворота (или при пропадании канала) следует закрывать позицию.

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Настройка индикатора MIT Balance

И есть еще 7 параметров группы «Цвет», которые определяют окраску отображаемых графических компонентов индикатора.

Balance of Power (BOP)

Home / Balance of Power (BOP)

Balance of Power (BOP) indicator measures the ability of bulls and bears to push the market to extremes. This indicator generates sell trade signals when the oscillator goes below 0 and buy trade signals when the oscillator goes above 0.

Combine the Balance of Power (BOP) technical indicator with our proven insurances and safeties while implementing an automated trading strategy with our highly customizable Trade Bot for complete control. Perform technical analysis with our marketview feature using the Balance of Power (BOP) technical indicator, which can be used in conjunction with our pattern analyzer to help find market trends that you can capitalize on.

What is a Technical Indicator?

Our high quality indicators can be used with crypto trading bots and for technical analysis. Technical indicators are often used to produce buy and sell trade signals with a HaasBot. Indicators can be stacked with Safeties and Insurances to produce high quality automated trading strategies.

Plan Restrictions

  • Beginner
  • Simple
  • Advanced

Indicator Documentation

All of the technical indicators, including the Balance of Power (BOP), that are available in our products are fully documented with formulas, common usage, settings, and more.

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