Balance of Power MetaTrader 4 Indicator & Balance of Power 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 price to extreme levels.

MetaTrader 4 Indicator & Generating Signals

When using this technical MetaTrader 4 Indicator, the zero line crossovers are used to generate signals.

Center is marked as the zero line, areas oscillating above or below are used to generate trading 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 FX Signals

Buy Signal

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

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

Sell Signal

When BOP crosses below zero a sell signal is given.

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

Sell & Buy Signals

Forex Divergence Trading

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

Classic Divergence - Trend reversal signal

Hidden Divergence - Trend continuation

FX Trading Overbought and Oversold Conditions

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

• Overbought-Oversold levels can be used to provide an early signal for potential trend reversals.
• These levels are generated when the MetaTrader 4 Indicator clusters its tops and bottoms thus setting up the overbought and oversold levels around those values.

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

From the example below, even though the Balance of Power showed the price was oversold, price continued moving downwards until the MetaTrader 4 Indicator crossed over to above Zero.

MetaTrader 4 Technical Indicator