Balance of Power (BOP) indicator

The Balance of Power (BOP) indicator is a technical analysis tool that measures the strength of buyers and sellers in a market. It was developed by Igor Livshin and was first introduced in his article "Balance of Power - A New Approach to the Technical Analysis of the Stock Market" in the August 1995 issue of Stocks and Commodities Magazine.

The BOP indicator is based on the idea that the power in a market lies with the side that is able to exert more influence on price movements. In other words, if buyers are more aggressive than sellers, prices will tend to rise, and if sellers are more aggressive than buyers, prices will tend to fall.

The BOP indicator is calculated as follows:

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

Where:

• Close price: The closing price of the current period.
• Open price: The opening price of the current period.
• High price: The highest price of the current period.
• Low price: The lowest price of the current period.

The BOP indicator oscillates around a centerline at zero. When the BOP is positive, it suggests that buyers are more aggressive than sellers, and when the BOP is negative, it suggests that sellers are more aggressive than buyers.

Traders can use the BOP indicator in various ways, such as to identify divergences between the indicator and price, to confirm trend changes, or to spot overbought or oversold conditions.