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Balance of Power XAUUSD Technical Analysis and Balance of Power XAUUSD Signals

Developed by Igor Livshin


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


Balance of Power Technical XAUUSD Indicator



XAUUSD Technical Analysis and Generating XAUUSD Signals


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

The center is marked as the zero line, levels oscillating above or below are used to generate xauusd 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 XAUUSD Signals


Buy

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

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



Sell

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

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


Balance of Power crosses below zero sell xauusd signal

Sell and Buy XAUUSD Signals


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Divergence XAUUSD

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


Classic Divergence - XAUUSD Trend reversal xauusd signal



Hidden Divergence - XAUUSD Trend continuation



Trading Overbought/Oversold Conditions

This Balance of Power can be used to identify potentially overbought and oversold conditions in gold price movement.



  • Overbought/Oversold levels can be used to provide an early warning for potential xauusd trend reversals.

  • These levels are generated when the indicator clusters its tops and bottoms thus setting up the overbought and oversold levels around those values.


However, gold price may also stay at these overbought and oversold levels and continue moving in that direction for a while and thus it's always good to wait until the BOP crosses over the Zero mark.


From the xauusd example shown below, even though the Balance of Power showed the gold price was oversold, gold price continued moving downwards until the indicator crossed over to above Zero.

Overbought/Oversold conditions

Technical Analysis

 

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