Balance Of Power (BOP)

Parameters: period = 14 (1–50)

Overview

The Balance of Power (BOP) indicator, developed by Igor Livshin and introduced in Stocks and Commodities Magazine in 2001, measures the strength of buyers versus sellers by evaluating how far prices can be pushed from the open relative to the total trading range. This unique approach reveals which side truly controls the market by analyzing the relationship between all four price points: open, high, low, and close.

BOP's key insight is that the ability to push the closing price toward the extremes of the day's range reveals true market control. When buyers dominate, they drive the close near the high; when sellers control, they push the close toward the low. This makes BOP particularly effective at identifying hidden strength or weakness before it becomes apparent in price action, giving traders an edge in anticipating market shifts.

Interpretation & Trading Signals

Market Control Zones:

  • +1.0: Maximum bullish control - buyers pushing price to daily highs
  • +0.5 to +1.0: Strong buying pressure - enter long positions as buyers dominate
  • 0 to +0.5: Moderate buying - bulls gaining control but not dominant
  • 0: Perfect equilibrium - market indecision, wait for breakout
  • -0.5 to 0: Moderate selling - bears starting to take control
  • -1.0 to -0.5: Strong selling pressure - consider short positions
  • -1.0: Maximum bearish control - sellers driving price to daily lows

Trading Strategies (2025):

  • Zero Line Cross: Buy when BOP crosses above zero (bulls taking control), sell when crossing below
  • Reversal Signals: Sudden BOP shift from extreme positive to negative warns of trend reversal
  • Divergence Trading: Price making new highs while BOP declining = bearish divergence
  • Momentum Confirmation: Rising BOP with rising prices confirms uptrend strength
  • 14-Period SMA: Apply smoothing to reduce choppiness on daily charts

Entry/Exit Rules:

  • Long Entry: BOP shows strong positive value above +0.5, confirming buyer control
  • Long Exit: BOP moves toward zero or turns negative, signaling loss of momentum
  • Short Entry: BOP drops below -0.5, confirming seller dominance
  • Risk Management: Always combine with other indicators for confirmation

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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