Balance of Power CFD Technical Analysis and Balance of Power CFD Signals

Created by Igor Livshin

Balance of Power indicator measures the strength of the bulls versus the bears by assessing ability of each to push cfd price to extreme levels.

CFD Technical Analysis and Generating CFDs Signals

When using this technical indicator, the zero line crossovers are used to generate trading signals.

Center is marked as the zero line, areas oscillating above or below are used to generate trade 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 & Sell CFD Signals

Buy Signal

When the BOP crosses above the zero a buy cfd trade signal is given.

Also when the BOP is rising, the cfd market is in an upward trend, some traders use this as a buy signal but it's best to wait for the confirmation by moving above the zero mark. As this will be a buy signal in a bearish territory and this type of trading signal is more likely to be a cfd whipsaw.

Sell Signal

When the BOP crosses below zero a sell cfd trade signal is given.

Also when the BOP is declining, the cfd market is in a downward trend, some traders use this as a sell signal but it is best to wait for a confirmation by moving below the zero mark because this will be a sell signal in bullish territory and this type of trading signal is more likely to be a cfd whipsaw.

Sell and Buy CFD Signals

Divergence CFD

In cfds trading, divergences between the BOP and cfd price can be used to effectively spotting potential reversal and/or trend continuation points in the cfd price movement. There are several types of divergences:

Classic Divergence - CFD Trend reversal cfd trade signal

Hidden Divergence - CFD Trading Trend continuation

CFDs Trading Overbought-Oversold Conditions

This Balance of Power can be used to identify potentially overbought and over-sold conditions in cfd price movement.

• Overbought-Oversold levels can be used to provide an early signal for potential cfd trend reversals.
• These levels are generated when indicator clusters its tops & bottoms thus setting up the overbought & oversold levels around those values.

However, cfd price might also stay at these over bought & oversold levels & continue moving in that direction for a while & thus it is always good to wait until the BOP crosses over Zero mark.

From the cfd example explained and illustrated below, even though the Balance of Power showed the cfd price was oversold, price continued heading downwards until the indicator crossed over to above Zero.

Technical Analysis in CFDs Trading