Balance of Power (14)

The Balance of Power (14) is a advanced indicators indicator used in Skyrexio Strategy Builder for advanced market analysis and complex signal generation.

Introduction

The Balance of Power (BOP) is a neutral indicator that measures the strength of buyers versus sellers by evaluating each side's ability to drive prices to extreme levels. This advanced indicator provides context-dependent signals for both LONG and SHORT opportunities based on market conditions and buyer/seller dominance patterns.

How Balance of Power Works

Balance of Power was developed by Igor Livshin to measure the relative strength between buyers and sellers by analyzing where prices close relative to their high-low range. The calculation compares the closing price position within the day's range to determine market control.

Calculation: BOP = (Close - Open) / (High - Low)

• Positive values - Buyers are stronger, prices closing near highs • Negative values - Sellers are stronger, prices closing near lows • Zero line - Equilibrium between buyers and sellers • Extreme values - Strong dominance by one side • Oscillating pattern - Indicates shifting market control

Market Psychology: Balance of Power reveals who controls the market session. When BOP is positive, buyers successfully pushed prices higher from the open, showing bullish control. When negative, sellers dominated and pushed prices lower, indicating bearish control. The magnitude shows the strength of that control.

Key Characteristics

Attribute	Details
Category	Advanced Indicators
Type	Neutral Oscillator
Primary Use	Market control analysis
Timeframe	All timeframes supported (1m to 1M)
Confirmation	Volume, trend context, momentum

Strategy Applications

🟢 LONG STRATEGY (Buyer Dominance)

Use Balance of Power for LONG entries when buyers show consistent dominance (positive BOP values), especially when confirmed by trend and volume analysis.

Base Entry Order (LONG)

Trigger Type: Once per bar close
Bar TF: 1H

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.1

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

Additional Entry Orders (LONG)

Additional Entry 1: Strengthening buyer control
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.2

AND

First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: EMA (21)
Timeframe: 1H

OR

Additional Entry 2: Trend confirmation with buyer strength
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.15

AND

First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 55

Take Profit Orders (LONG)

Rule 1: Exit condition - Seller dominance emerges
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.1

OR

Rule 2: Exit condition - Overbought with weakening buyers
First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 0.05

OR

Rule 3: Exit condition - Volume exhaustion signal
First Condition: Volume
Timeframe: 1H
Operator: Less Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 0.1

Stop Loss Orders (LONG)

Rule 1: Stop loss - Strong seller dominance confirmed
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.2

OR

Rule 2: Stop loss - Trend breakdown with seller control
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: EMA (21)
Timeframe: 1H

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.1

OR

Rule 3: Stop loss - Volume spike confirms seller dominance
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.15

🔴 SHORT STRATEGY (Seller Dominance)

Use Balance of Power for SHORT entries when sellers show consistent dominance (negative BOP values), especially when confirmed by bearish trend and volume analysis.

Base Entry Order (SHORT)

Trigger Type: Once per bar close
Bar TF: 1H

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.1

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

Additional Entry Orders (SHORT)

Additional Entry 1: Strengthening seller control
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.2

AND

First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: EMA (21)
Timeframe: 1H

OR

Additional Entry 2: Trend confirmation with seller strength
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: -0.15

AND

First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 45

Take Profit Orders (SHORT)

Rule 1: Exit condition - Buyer dominance emerges
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.1

OR

Rule 2: Exit condition - Oversold with weakening sellers
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: -0.05

OR

Rule 3: Exit condition - Volume exhaustion signal
First Condition: Volume
Timeframe: 1H
Operator: Less Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: -0.1

Stop Loss Orders (SHORT)

Rule 1: Stop loss - Strong buyer dominance confirmed
First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.2

OR

Rule 2: Stop loss - Trend reversal with buyer control
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: EMA (21)
Timeframe: 1H

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.1

OR

Rule 3: Stop loss - Volume spike confirms buyer dominance
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Balance of Power (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 0.15

Advanced Strategy Combinations

Multi-Timeframe Market Control Analysis

Setup

Higher Timeframe Context:

• Daily: Balance of Power trend direction

• 4H: Dominant market control pattern

• 1H: Execution timeframe for entries

• 15m: Fine-tuning entry timing

Execution

Entry: 1H BOP signal confirmed by 4H trend Target: Previous swing levels Stop: Control shift confirmation

Volume-Confirmed Market Control

Setup Process:

1. Balance of Power shows clear dominance (>0.2 or <-0.2)

2. Volume above average confirms the control

3. Price action aligns with BOP direction

4. Momentum indicators support the bias

Execution:

• Base Order: BOP dominance + volume confirmation

• Additional: Strengthening control patterns

• Take Profit: Control shift or momentum exhaustion

• Stop Loss: Strong opposite control emergence

Divergence Analysis Strategy

Divergence Signals:

• Bullish Divergence: Price makes lower lows while BOP makes higher lows

• Bearish Divergence: Price makes higher highs while BOP makes lower highs

• Hidden Divergence: Trend continuation patterns in BOP vs price

Trading Approach:

• Wait for divergence confirmation

• Enter in direction of BOP signal

• Use tight stops as divergences can fail

Risk Management Guidelines

Position Sizing

Strategy Type	Position Size	Conditions
Strong BOP Signal	Standard	BOP >0.2 or <-0.2 with volume
Moderate BOP Signal	Reduced (75%)	BOP 0.1-0.2 or -0.1 to -0.2
Weak BOP Signal	Small (50%)	BOP near zero line
Conflicting Signals	Avoid	Mixed BOP and price signals

Balance of Power Reliability Factors

High Reliability

✅ Strong BOP values (>0.2 or <-0.2) ✅ Volume confirmation present ✅ Aligns with price trend direction ✅ Consistent pattern over multiple periods

Low Reliability

❌ Weak BOP values (near zero) ❌ Low volume confirmation ❌ Conflicts with price trend ❌ Erratic, inconsistent readings

Best Practices

For LONG Strategies

1. Positive BOP confirmation - Look for consistent positive values >0.1

2. Volume validation - Ensure buying pressure is backed by volume

3. Trend alignment - Best results when BOP aligns with uptrend

4. Multiple timeframes - Confirm signals across different periods

For SHORT Strategies

1. Negative BOP confirmation - Look for consistent negative values <-0.1

2. Volume validation - Ensure selling pressure is backed by volume

3. Trend alignment - Best results when BOP aligns with downtrend

4. Multiple timeframes - Confirm signals across different periods

Common Mistakes to Avoid

• Ignoring volume - BOP without volume confirmation can be misleading

• Zero-line whipsaws - Avoid trading when BOP oscillates around zero

• Trend contradiction - Don't fight strong trends based on BOP alone

• Over-optimization - Don't curve-fit BOP parameters to historical data

Market Conditions Analysis

Market Type	LONG Strategy Effectiveness	SHORT Strategy Effectiveness
Uptrend	🟢 High (with positive BOP)	🟡 Medium (counter-trend)
Downtrend	🟡 Medium (counter-trend)	🟢 High (with negative BOP)
Ranging	🟡 Medium (mean reversion)	🟡 Medium (mean reversion)
High Volatility	🟢 High (clear control signals)	🟢 High (clear control signals)
Low Volume	🔴 Low (wait for confirmation)	🔴 Low (wait for confirmation)

Related Indicators

Indicator	Relationship	Link
Volume	Confirms BOP signals	Volume
RSI	Momentum confirmation	RSI
MACD	Trend momentum	MACD
Moving Averages	Trend context	EMA

Conclusion

Balance of Power is a powerful neutral indicator that reveals market control dynamics between buyers and sellers. Its effectiveness comes from identifying who is winning the battle for price control, making it valuable for both LONG and SHORT strategies when used with proper context and confirmation.

Key Takeaways

• PRIMARY USE: Market control analysis for directional bias

• SECONDARY USE: Divergence analysis for trend changes

• TERTIARY USE: Volume-confirmed entry timing

• ALWAYS: Combine with volume and trend analysis for best results

Success with Balance of Power requires understanding that it measures the effectiveness of buyers vs sellers in controlling price action. Use it to identify when one side is gaining control and trade in that direction with proper risk management and confirmation signals.

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