Introduced by Igor Levshin in the August 2001 issue of Technical Analysis of Stocks & Commodities magazine, this indicator compares the power of buyers to push prices to higher extremes with the power of sellers to move prices to lower extremes.
When the indicator is in positive territory, the bulls are in charge; and sellers dominate when the indicator is negative.
A reading near the zero line indicates a balance between the two and can mean a trend reversal.Note: This indicator is sometimes referred to as Balance of Market Power (BMP).CalculationLivshin's original calculation method for the Balance of Power indicator is fairly complex, but can be reduced to a much simpler formula:BOP = (Close - Open) / (High - Low)Of course, using these raw daily values makes for a choppy oscillator, so the values are typically smoothed with a moving average.
Livshin recommends smoothing with a 14-period SMA, but the number of periods can be modified to fit the timeframe being charted.The resulting indicator oscillates between -1 and +1.
Like most oscillators, the Balance of Power indicator can be used to identify trends, divergences from price, and overbought/oversold conditions.
Zero-line crossovers indicate a move into positive or negative territory, and are often used as buy or sell signals.
Introduced by Igor Levshin in the August 2001 issue of Technical Analysis of Stocks & Commodities magazine, this indicator compares the power of buyers to push prices to higher extremes with the power of sellers to move prices to lower extremes.
When the indicator is in positive territory, the bulls are in charge; and sellers dominate when the indicator is negative.
A reading near the zero line indicates a balance between the two and can mean a trend reversal.Note: This indicator is sometimes referred to as Balance of Market Power (BMP).CalculationLivshin's original calculation method for the Balance of Power indicator is fairly complex, but can be reduced to a much simpler formula:BOP = (Close - Open) / (High - Low)Of course, using these raw daily values makes for a choppy oscillator, so the values are typically smoothed with a moving average.
Livshin recommends smoothing with a 14-period SMA, but the number of periods can be modified to fit the timeframe being charted.The resulting indicator oscillates between -1 and +1.
Like most oscillators, the Balance of Power indicator can be used to identify trends, divergences from price, and overbought/oversold conditions.
Zero-line crossovers indicate a move into positive or negative territory, and are often used as buy or sell signals.