BOP Indicator – What Is It, How Does it Work & How Do I Use It?

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If you are trading in Iq Option, you cannot afford to use a single chart analysis tool.

That way, you may never really reach a point of acing the markets and trading profitably.

You need a well-thought-out combination of technical indicators and chart analysis tools that will sail you through to win after win!!

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That said, it is only necessary that you get information about every other technical indicator and tool you come across. You never know which combination will work best for you!!

Today I will add to your list of indicators – the Balance of Power (BOP) Indicator!!

Read the whole post to learn everything there is to know about the Balance of Power Indicator.

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Don’t flinch.

What to expect in this guide.

  • What is the Balance of Power (BOP) Indicator?
  • The Principle behind the Balance of Power Indicator.
  • How to Set Up the Balance of Power Indicator on Iq Option.
  • Using the Balance of Power Indicator to trade Options on Iq Option.

What is the Balance of Power (BOP) Indicator?

The Balance of Power Indicator is a technical analysis tool.

It measures the balance between the market power of buyers and sellers at any given time.

It helps traders determine the prevailing sentiment at the moment.

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Traders may use this indicator to;

  • Identify the direction of a trend.
  • Find divergences between the price and BOP to identify a potential trend reversal or trend continuation.
  • Identify overbought and oversold conditions.

This indicator was developed by Igor Livshen.

When applied, it appears as a continuous line at the bottom of the Iq Option charts.

Interestingly, the BOP indicator can be used with any asset on Iq Option.

The Principle behind the Balance of Power Indicator.

In Iq Option, the most important principle about the balance of power indicator is this;

  • When the signal line is above the zero line, positive market sentiment is prevalent. Buyers have an upper hand.
  • When the signal line is below the zero line, negative sentiment is prevalent. Sellers are dominating the market.

The indicator is tracing dominant market conditions in real-time!!

 

The Balance of Power Indicator may look like any other simple oscillator on Iq Option but I want you to note that it is not.

It works differently from other oscillators and indicators.

It does not react to upward and downward price movements like many indicators and oscillators do!! Instead, it has its formula to operate!!

Let us have a quick look at its calculation formula;

Balance of Power = (Closing price minus Opening price) / (High price minus Low price)

Just to explain the symbols.

If you want to calculate the hourly Balance of power, you will first subtract the Opening price of the hour from the Closing price of the hour. Divide what you get by the value of (The highest price of the hour minus the lowest price of the hour). It is that easy!!

How to Set Up the Balance of Power Indicator on Iq Option.

Set Up the Balance of Power Indicator on Iq Option in the following steps.

  • Log into your Iq Option trading account.
  • Locate the Tools Tab at the bottom of the interface – Scissors-like.
  • Hit the Tools Tab.
  • Select Indicators from the Options that pop up. A list of Indicators will appear.
  • Move your cursor to momentum to select Balance of Power from the list.
  • A pop-up will appear for you to modify the period, color, and width of the Indicator.
  • Hit the Apply button once you adjust those parameters.
  • A continuous line will appear at the bottom part of the interface below the chart.

 

Using the Balance of Power Indicator to trade Forex on Iq Option.

The Balance of Power Indicator can provide signals to help traders on Iq Options to trade profitably!!

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Let us see how the indicator is used to trade Options on Iq Option.

The Balance of Power indicator provides the following signals on Iq Option;

  • Zero line crossovers.
  • Convergence.
  • Divergence.

Zero line cross overs.

This is the basic trading signal that the Balance of Power indicator gives.

Say the signal line of the BOP Indicator crosses the zero line from below upwards and continues to rise. That is a bullish signal. Plan to Buy!

 

The signal line of the Balance of Power Indicator crosses the zero line from above downwards and continues to fall. You will do well if you plan to Sell!

 

Note – Information provided by the Balance of Power Indicator is not solely enough.

Remember we said that the BOP Indicator does not respond to the upward and downward price swings.

That is to mean the BOP Indicator signal line may be above zero but still, the price will fall!!

The vice versa is also true!! BOP Indicator is not connected to the market trends!!

To mean, you should use this indicator carefully. Combine it with other technical indicators and chart analysis tools for more accurate signals!!

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When other chart analysis tools point toward a particular price direction, you may use the Balance of Power Indicator.

See what other traders portray about the price. After all, each trader is using different analysis tools.

Also Read: How to Trade Using the Commodity Channel Index – CCI on IQ Option

Convergences.

These occur when the Balance of power is in sync with the market price.

If the market makes two higher peaks in an uptrend, the BOP Indicator also makes high peaks consecutively.

This is a signal that the price is going to move higher or at least retest the most recent highs!! The vice versa is also true with a downtrend.

Once you spot this, wait for a pullback then position yourself following the trend to win big!!

Look out for pullbacks which may precede zero cross-overs hinting to strong Buy/Sell signals!!

Divergences.

These occur when the Balance of Power Indicator is not in sync with the market price.

In an Uptrend, the market makes two consecutive higher peaks. The BOP indicator makes a higher peak then another higher peak which is not as high.

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This signifies that the trend will reverse soon.  The same thing applies to a downtrend.

Once you spot such a divergence, prepare to take a trade against the trend. The trend is about to reverse.

Divergences may not be that easy to trade. They, therefore, are not recommended for newbies but experienced traders.

Conclusion.

Information provided by the Balance of Power Indicator is not enough on its own. Combine it with other tools for more effective and accurate results.

Now that you know everything about the Balance of Power indicator. Include it in your Iq Option trading strategy and win big!!

Happy Trading!!

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