Here Are Tips to Get Started Using Balance of Power BOP Indicator
TC2000 Users have a huge advantage over Traders who do not use this charting program. Unfortunately most TC2000 Users are not taking full advantage of tools embedded in this charting software program. One of the many tools that are unique to TC2000 is the Balance of Power Indicator. This indicator continues to evolve and change as the Market Structure changes, making it one of the most powerful indicators ever written.Regardless of whether you use MACD, ADX, Bollinger Bands, RSI, or other popular indicators, adding Balance of Power to what you use will change how you interpret charts, analyze stocks, and select stocks to trade. The Balance of Power Indicator was designed for the modern automated markets. Watch a video about how to use this powerful leading indicator.
Go to the TC2000 Learning Center and choose to watch the "BOP Indicator" Webinar.
Balance of Power is a leading
indicator IF you learn to read it properly. Here is a list of tips to help you
get started:
1. Just assuming red
means distribution and green means accumulation, is an oversimplification of
this sensitive and extremely powerful indicator. It is one of the longest
formulas every written with 3.5 pages of algorithms. The Stock Market has
splintered into 72 venues with some lit and some dark, and 9 Market Participant
Groups. Therefore red versus green analysis is just the beginning. Traders need
to know which Market Participant Group forms that particular red or green
pattern.
2. The length of the
indicator bars MATTERS. How long the bars are tells you which Market
Participant Group is buying or selling, and that reveals important information
in relation to how Price and Volume are behaving. As an example blasting long
red Balance of Power bars in a Bottoming Formation is not giant Buy Side
Institutions using Dark Pools, instead it is Smaller Funds using Volume
Weighted Average Priced triggers.
3. Where in the Trend
it turns green or red MATTERS. Different Market Participant Groups buy and sell
at different locations in the Trend, based on their access to pertinent
information. Some Market Participant Groups have access BEFORE the rest of the
groups hear about it. So those groups are buying or selling ahead of the
others.
4. To properly
interpret this indicator you must use not only the Balance of Power indicator,
but also Volume Bars and Price Patterns in combination. Using all three
together is called Relational Technical Analysis™ and the stock chart
creates a viable picture that makes sense.
The chart example
below shows the Relational Technical Analysis which gives the Balance of
Power indicator logical and sensible interpretation, that Traders can use
to enter a stock before huge gaps and runs.
This candlestick
chart pattern is a rounding Bottom Formation, which is common for giant Buy
Side Institutions Dark Pool Quiet Accumulation. Bottoms of this kind take
several months to complete, and can have gaps or sudden runs that provide
excellent profits for Swing Traders.
Go watch the Swing
Trading Video to learn about precision entries and exits, and how to use
leading indicators to enter before price moves.
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to the TechniTrader
The Relational Technical
Analysis between Balance of Power, Volume Bars, and Price Patterns tell
us early on what is happening, way ahead of the gap due to High Frequency
Trading filling the queues pre-market on the day of the gap. The Dark Pools are
quietly accumulating while Smaller Funds who use Volume Weighted Average Price
trigger orders are still dumping the stock, unaware that they are selling into
a Dark Pool Buy Zone™ price range.
What tells us this is
a Dark Pool Buy Zone, is that the extremely long red bars of Volume Weighted
Average Price Smaller Funds selling does not drive Price down. Instead the
indicator bars turn gray and are very short suddenly and intermittently, as
Dark Pools go head to head against the Volume Weighted Average Price orders and
buy incrementally over time.
Volume spikes high
above the Exponential Moving Average only when High Frequency Traders trigger
again, attempting to sell the stock down but failing to move it beyond the lows
of the Buy Zone. Then as Smaller Funds selling evaporates, the Shift of
Sentiment™ forms as indicated by the red and green arrows. This is a trader’s
signal that a Momentum Run is imminent. High Frequency Traders gap the stock up
on high Volume and high green Balance of Power bars. Smaller Funds chase
them, as their Volume Weighted Average Price orders always trigger after an
High Frequency Traders huge Volume spike.
Go to the
TechniTrader Learning Center and watch a wide variety of training
webinars.
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to the TechniTrader
Summary
Learning how to use
the Balance of Power indicator properly is not hard but it requires an
understanding of the relationship between the Indicator Patterns, Price
Patterns, Volume Bars, Trend, and Market Conditions.
Beginners to the
Basics of the Stock Market 12 Webinar Lessons to get started trading and
investing.
Go to the TechniTrader
TechniTrader
The Gold Standard in Stock Market Education
Trade Wisely,
Martha
Stokes CMT
TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDs with every course.
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Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.