Balance of Power Indicator Forex Technical Analysis Buy & Sell Signals
Balance of Power Technical Indicator measures the strength of the bulls versus the bears by assessing the ability of each to push price to extreme levels.
Balance of Power Trading Indicator
Balance of Power Indicator Technical Analysis & Generating Signals
When using this Balance of market Power trading indicator, the zero line cross overs are used to generate Forex signals.
Center is marked as the zero line, areas oscillating above or below are used to generate trading signals.
Buy - The scale is marked from Zero to +100 for bullish market movements
Sell - The scale is marked from Zero to -100 for bearish market movements
How to Generate Buy and Sell Signals with Balance of Power Indicator
Buy Signal
When the BOP crosses above zero a buy signal is given.
Also when the Balance of Power Trading Indicator is rising, the market is in an upward trend, some traders use this as a buy signal but it is best to wait for the confirmation by moving above the zero mark. As this will be a buy signal in bearish territory & this type of trading signal is more likely to be a whipsaw.
Sell Signal
When BOP crosses below zero a sell signal is given.
Also when the Balance of Power Technical Indicator is declining, the market is in a downward trend, some traders use this as a sell signal but it's best to wait for a confirmation by moving below the zero mark because this will be a sell signal in bullish territory & this type of trading signal is more likely to be a whipsaw.
Sell & Buy Signals - Balance of Power Trading Indicator
Divergence Forex Trading
In forex trading, divergences between the Balance of Power Indicator & price can be used to effectively spotting potential reversal and/or trend continuation points in currency movement. There are several types of divergences:
Balance of Power Trading Indicator Classic Divergence - Trend reversal signal
Balance of Power Technical Indicator Hidden Divergence - Trend continuation
Forex Trading Overbought Oversold Conditions with Balance of Power Indicator
This Balance of Power Technical Indicator can be used to identify potentially overbought & over-sold conditions in price movement.
- Balance of Power Trading Indicator Overbought/Oversold levels can be used to provide an early warning for potential trend reversals.
- These levels are generated when indicator clusters its tops and bottoms thus setting up the overbought & oversold levels around those values.
However, price may also stay at these over bought and oversold levels and continue moving in that direction for a while and thus its always good to wait until the Balance of Power Indicator crosses over the Zero mark.
From the example below, even though the Balance of Power Indicator showed price was oversold, price continued heading downward until the technical indicator crossed over to above Zero.
Technical Analysis - Balance of Power Trading Indicator
