Using Balance of Power to Assess Buyer and Seller Strength
Summary
Balance of Power (BOP), introduced by Igor Livshin, is an oscillator intended to compare buyers’ and sellers’ ability to move price toward its high or low. Its values range from -1 to +1, and the version described follows the calculation published in Stocks and Commodities Magazine. Raw values may be smoothed with a moving average of any type.
The document describes several proposed readings: how indicator peaks and troughs cluster may reflect bull or bear market conditions; divergence, trend, and overbought or oversold analysis are also suggested. A 14-period moving average is recommended for daily charts, with the caveat that suitable periods vary by market and timeframe. A change in BOP direction is framed as an early warning that needs confirmation from price. These are usage claims, not backtest evidence, and no quantitative validation is supplied.
Key ideas
- BOP estimates the relative ability of buyers and sellers to push price toward an extreme.
- The oscillator ranges from -1 to +1, and its raw values can be smoothed with a moving average.
- Peak and trough clustering may help characterize bull and bear market behavior.
- BOP can be applied to divergence, trend, and overbought or oversold analysis.
- A change in the indicator’s trend is a warning that should be confirmed by price direction.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.