The Balance of Market Power indicator(BOP) is designed on Igor Livshin’s article in August,2001 issue of the “Stocks and Commodities Magazine”.
According to Livshin, "The balance of power (BOP) indicator measures the strength of the bulls vs. bears by assessing the ability of each to push price to an extreme level."
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For daily charts, a 14-period moving average is recommended, though the number of periods varies depending on the nature of the market and the time frame.
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One of the most important properties of BOP is the level at which it clusters its tops and bottoms. During bull markets, its tops often reach the upper limit and never reach the bottom level. During bear markets, the picture is reversed.
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BOP supports price divergence, trends, and overbought-oversold levels.
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A change in the BOP trend serves as a warning signal and should be confirmed by a change in the price direction.
The BOP oscillates between extremes of -1 and +1. This value can be optionally smoothed using any moving average type.
Calculation:
Inputs: None
Indicator Type: Trend