What is Balance Of Power
Don Worden created the balance of power (BOP) indicator in the 1950s to understand market activity between buyers and sellers. The Balance of Power is an oscillating indicator that measures the market strength of buyers against sellers by assessing the ability of each side to drive prices to an extreme level. The value produced by the indicator oscillates between -1 and 1.
Note: This indicator is sometimes referred to as Balance of Market Power (BMP).
Balance Of Power Indicator
The Balance Of Power is an oscillator indicator that measures the strength of the buyers’ market against sellers. It does this by assessing the ability of either side to drive prices to an extremity.
The BOP Indicator is plotted about a zero line. When it is above the zero line, it showcases systematic buying and indicates systematic selling with it is below the zero line.
How To Calculate Balance Of Power
Formula:- Balance of Power = (Close price – Open price) / (High price – Low price)
Why Use Balance Of Power
Traders can use the BOP indicator to identify the direction of a trend and enter/exit the market accordingly. Moreover, they can also take advantages of oversold and overbought conditions.
How to Use Balance Of Power
Bullish Scenario:- Since BOP is an oscillator means that if it goes above 0 and stays there, that generally indicates an upward trend, i.e. a bullish scenario.
Bearish Scenario:- Similarly, if it goes below 0 and stays there, that generally indicates a downward trend, i.e. a bearish scenario.
Building Balance Of Power Trading Strategy in Mudrex
BUY:- BOP crosses up 0.1
SELL:- BOP crosses down -0.1
TIME FRAME:- 4Hrs
STOP LOSS:- 15%(Trailing)
Creating on Mudrex:-
We will use 2 BOP indicator blocks—one for selling and One for buying.
For buying, we will use the following settings:-
For selling, we will use the following settings:-
Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 50.18%