BOP (Balance of Power)

Balance of Power (BOP) is an oscillator that measures the strength of buyers versus sellers by assessing the ability of each to push price to extreme levels. It oscillates between -1 and +1, with positive values indicating buyer dominance and negative values indicating seller dominance.

BOP is calculated using the relationship between the open, close, high, and low:

BOP = (Close - Open) / (High - Low)

The raw value is typically smoothed with a simple moving average to reduce noise.

• Above 0 — Buyers are in control (bullish)
• Below 0 — Sellers are in control (bearish)
• Near +1 — Extreme buyer dominance
• Near -1 — Extreme seller dominance
• 0 — Equilibrium between buyers and sellers

Buy signals

• BOP crosses above 0 (buyers taking control)
• BOP consistently positive and rising (strengthening bull trend)
• BOP rebounds from extreme negative values

Sell signals

• BOP crosses below 0 (sellers taking control)
• BOP consistently negative and falling (strengthening bear trend)
• BOP reverses from extreme positive values

| Parameter | Default | Description | |-----------|---------|-------------| | Smoothing | 14 | SMA period applied to raw BOP |

| Condition | Meaning | |-----------|---------| | BOP > 0 | Buyers dominate | | BOP < 0 | Sellers dominate | | BOP cross_over 0 | Shift to buyer control | | BOP cross_under 0 | Shift to seller control |

BOP + Trend Filter

Combine BOP with a trend indicator for higher-quality signals:

• Enter long when BOP cross_over 0 AND close > EMA(50) — buyer strength confirmed in uptrend
• Enter short when BOP cross_under 0 AND close < EMA(50) — seller strength confirmed in downtrend

BOP Divergence

• Price makes a new high but BOP makes a lower high → bearish divergence (buyers weakening)
• Price makes a new low but BOP makes a higher low → bullish divergence (sellers weakening)
• Divergence signals are most reliable on 4h and daily timeframes

• BOP is a leading indicator — it often signals shifts before price moves
• Use SMA smoothing to reduce whipsaws
• Divergence between BOP and price is a powerful signal
• Works best when combined with volume analysis
• In sideways markets, BOP frequently oscillates around zero — avoid trading these signals