LEARN BALANCE OF POWER（BOP） IN 3 MINUTES – BLOCKCHAIN 101

In the cryptocurrency trading market, technical analysis index is an essential weapon for every trader. Through these indicators, traders can better predict market trends, so as to formulate more accurate trading strategies. Among them, the Balance of Power(BOP) indicator is a popular tool, which can help traders identify the buying and selling power of the market, so as to capture the best trading opportunities. This paper will deeply discuss the principle, calculation method, application skills of BOP index and its practical application in cryptocurrency trading.

Ⅰ. Introduction of Balance of Power(BOP) Index

Balance of Power(BOP) index was put forward by Igor Livshin in 2001 to measure the balance of buying and selling power in the market. Through the analysis of price fluctuation, this indicator reveals the comparison of long and short forces in the market, thus helping traders to judge the strength and weakness of the market.

Ⅱ. the calculation method of BOP index

The calculation formula of BOP index is as follows:

BOP=（Close−Open）/（High-Low）

Among them, Close is the closing price, Open is the opening price, High is the highest price and Low is the lowest price.

The above formula shows that the BOP index measures the ratio of the amplitude of price change to its intraday fluctuation range. When the BOP value is positive, it shows that the buyer’s strength is dominant; When the BOP value is negative, it shows that the seller’s strength is dominant.

Ⅲ. how to interpret BOP indicators

BOP value is positive: when BOP value is positive, it means that the closing price of the day is higher than the opening price, and the buyer’s power in the market is strong. At this point, traders can consider buying strategies.

Negative BOP value: when the BOP value is negative, it means that the closing price of the day is lower than the opening price, and the seller in the market is stronger. At this point, traders can consider selling strategies.

BOP value is zero: when the BOP value is close to zero, it indicates that the opening price and closing price of the day are almost the same, and the market is in equilibrium. At this point, traders should stay on the sidelines and wait for the market to make a clear direction.

Ⅳ. the application of BOP indicators in cryptocurrency transactions

In the cryptocurrency market, the price fluctuates violently, and BOP indicators can help traders better capture market opportunities. The following are some specific application scenarios of BOP indicators in cryptocurrency transactions:

Trend identification: By observing the changes of BOP indicators, traders can identify market trends. When the BOP value continues to be positive, it indicates that the market is on the rise; When the BOP value continues to be negative, it indicates that the market is in a downward trend.

Trading signal: When the BOP value changes from negative to positive, traders can consider buying; When the BOP value turns from positive to negative, traders can consider selling. In addition, when the BOP value fluctuates around zero, it can be comprehensively analyzed with other indicators (such as RSI, MACD, etc.) to determine the best trading opportunity.

Deviation signal: When the BOP indicator deviates from the price trend, it may indicate the reversal of the market. For example, when the price hits a new high and the BOP index fails to hit a new high, it shows that the buyer’s power is weakened and the market may fall; or vice versa, Dallas to the auditorium

Ⅴ. the actual case analysis

In order to better understand the application of BOP index, we analyze it through an actual case. Suppose the daily chart of a cryptocurrency is as follows:

January 1st: Opening price is 100, highest price is 110, lowest price is 90, and closing price is 105.

January 2nd: Opening price 105, highest price 115, lowest price 100, closing price 110.

January 3rd: The opening price is 110, the highest price is 120, the lowest price is 105 and the closing price is 115.

According to the BOP formula, we can calculate the BOP value of each day:

January 1st: BOP = (105100)/(11090) = 0.25.

January 2: BOP = (111105)/(115100) = 0.33.

January 3rd: BOP = (115110)/(120105) = 0.33.

It can be seen from the above calculation that the BOP value of the cryptocurrency is positive in these three days, indicating that the buyer’s strength is strong and the market is in an upward trend. At this point, traders can consider taking advantage of the trend to obtain rising profits.

In the SuperEx market indicator database, you can directly call up the graph of BOP indicators, and you can intuitively see the daily BOP values, thus inferring the market trend:

Ⅵ.Matters needing attention

Although BOP index plays an important role in technical analysis, the following points should be paid attention to in practical application:

Combined with other indicators: a single BOP indicator may be misjudged, so it is suggested to make a comprehensive analysis combined with other technical indicators (such as moving average and relative strength index) to improve the prediction accuracy.

Adaptive adjustment: different cryptocurrencies have different market characteristics, and traders should adjust the BOP index adaptively according to the specific situation. For example, for cryptocurrencies with large fluctuations, the threshold of BOP value can be appropriately relaxed.

Risk management: When trading with BOP indicators, risk management must be done well. Set stop-loss and take-profit points to prevent losses caused by market fluctuations.

VII. Conclusion

Balance of Power(BOP) index, as a tool to measure the buying and selling power in the market, has important application value in cryptocurrency trading. Through in-depth understanding and flexible use of BOP indicators, traders can better grasp the market trend and formulate more accurate trading strategies. However, in practice, traders should combine other technical indicators and do a good job in risk management to improve the success rate of trading.