The Balance of Power (BOP) is a nifty indicator crafted by Igor Livshin back in 2001. It helps traders gauge the tug-of-war between buyers and sellers with each candle. In this revamped version, we've incorporated a Simple Moving Average (SMA) to smooth out the calculations, making it easier to interpret without the usual noise.
This indicator clearly illustrates who’s got the upper hand in the market:
Buyers (bulls) are in control when the close is near the high.
Sellers (bears) take charge when the close is near the low.
The calculation is pretty straightforward:
BOP = (Close - Open) / (High - Low)
BOP > 0 - indicates buyer dominance
BOP < 0 - indicates seller dominance
BOP ≈ 0 - suggests balance or indecision
Extreme zones (e.g. ±0.2) - can signal exaggerated strength that might lead to a correction
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