Balance of Power (BOP)

🤔 What is it?

Balance of Power (BOP) measures the strength of buying and selling pressure. It shows who controls the market — the bulls 🐂 or the bears 🐻. The indicator moves above and below a zero line, signaling shifts in momentum.

⚙️ How It Works

• Above Zero ➔ Bulls are in control (buying pressure dominates).

• Below Zero ➔ Bears are stronger (selling pressure dominates).

• Near Zero ➔ Balance between buyers and sellers; a potential trend reversal may happen.

BOP often fluctuates quickly, helping traders see minor shifts before they appear on price charts.

📖 How to Read It

• Rising BOP ➔ Strengthening bullish momentum.

• Falling BOP ➔ Increasing bearish pressure.

• Flat or neutral BOP ➔ Market is undecided; wait for confirmation.

It's best to combine BOP with other tools like moving averages or trend indicators to avoid false signals.

⚙️ Best Settings

Default settings usually work fine (with a smoothing period like 14), but you can adjust the smoothing if the chart looks too noisy or too slow.

🛠️ How to Use It in a Strategy

• Entry Signals: Enter long when BOP crosses above zero after being negative, showing bulls are gaining control.

• Exit or Short Signals: Enter short when BOP drops below zero after being positive.

• Confirmation Tool: Use BOP alongside price patterns or trendlines for stronger setups.

Example: If you see a bullish candlestick pattern and BOP crosses above zero ➔ stronger reason to go long.

❌ Common Mistakes

• Trading without confirmation: Never rely only on BOP for entries. Confirm with price action or other indicators.

• Ignoring the trend: BOP can fluctuate a lot in sideways markets, causing false signals. Always check the bigger trend.

🌟 Final Thoughts

Balance of Power is a simple but powerful tool to measure market pressure. It’s easy to understand and can boost your timing when combined with other strategies. Remember, always trade smart — never depend on one indicator alone!