Balance Of Power (BOP) is an indicator that measures the market strength by assessing the strength of total buyers against that of total sellers and their ability to drive the price to extreme ends. This is an indicator, not an oscillator. BOP moves along a zero line. When the balance of power indicator is above zero line, it indicates buyers are in control. Similarly, when BOP goes below zero line, it shows sellers are strong. There are divergences also. Divergences are of two types, regular and hidden. This indicator can be plotted on Zerodha Kite charts.
Balance Of Power indicator Formula
(CLOSE – OPEN) / (HIGH – LOW)
How to set up Balance Of Power indicator in Zerodha Kite?
- Go to MarketWatch.
- Choose the stock you are going to trade.
- Right click on the stock and select chart from graphic icons.
- Chart window of the stock opens.
- Go to studies. Select studies.
- Go to Balance Of Power and click on it.
- A small window opens with default parameters of the indicator.
- Once the parameters are selected, the Done command is chosen, the parameters window goes off the screen and the indicator is plotted on stocks price.
- By default, BOP considers a 14-day period and simple moving average. But the default parameters can be modified as per own demand.
BOP in intraday –
- The indicator works well in all the time frames.
- The picture above shows State Bank of India (SBIN) stock price movement with respect to BOP.
- The chart shows 1 min. timeframe.
- The strategy shows the price trend. Understanding price trend from this indicator is important before creating a position.
- As can be seen in the picture above, a buy position is created when the BOP indicator goes up from below the zero line indicating price reversal.
- The buy position is closed when the BOP indicator tops above zero line and starts coming down accompanied by downward movement of price.
Partha, an engineer by education, is theoratically actively following the stock and commodity markets since 1990. He is an active trader since 2003. He has received formal education in future and options and quantum analysis. He is presently working on research oriented projects using Python and data analytics.