Balance of Power Bitcoin Analysis & Balance of Power Trading Signals
Created by Igor Livshin
Balance of Power indicator measures the strength of the bulls versus the bears by assessing the ability of each to push bitcoin price to extreme levels.
BTCUSD Analysis & How to Generate Trading Signals
When using this technical indicator, the zero line crossovers are used to generate bitcoin signals.
Center is marked as the zero line, areas oscillating above or below are used to generate bitcoin 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 Trading Signals
Buy Signal
When the BOP crosses above zero a buy bitcoin signal is given.
Also when the BOP is rising, the btcusd trading market is in an upwards trend, some traders use this as a buy cryptocurrency signal but it's best to wait for the confirmation by moving above the zero mark. As this will be a buy cryptocurrency signal in bearish territory & this type of signal is more likely to be a bitcoin trading whipsaw.
Sell Signal
When the BOP crosses below zero a sell bitcoin signal is given.
Also when the BOP is declining, the btcusd trading market is in a downwards trend, some traders use this as a sell cryptocurrency signal but it is best to wait for a confirmation by moving below the zero mark because this will be a sell cryptocurrency signal in bullish territory & this type of signal is more likely to be a bitcoin trading whipsaw.
Sell & Buy Trading Signals
Divergence BTCUSD Trading
In bitcoin trading, divergences between the BOP and bitcoin price can be used to effectively identifying potential reversal and/or trend continuation points in the bitcoin price movement. There are several types of divergences:
Classic Divergence - Bitcoin Trend reversal bitcoin trading signal
Hidden Divergence - Bitcoin Trend continuation
Bitcoin Trading Overbought and Oversold Conditions
This Balance of Power can be used to identify potentially overbought and oversold conditions in bitcoin price movement.
- Overbought/Oversold levels can be used to provide an early signal for potential trend reversals.
- These levels are generated when the indicator clusters its tops & bottoms thus setting up the overbought and oversold levels around those values.
However, bitcoin price may also stay at these over bought and oversold levels & continue moving in that direction for a while and thus it's always good to wait until the BOP crosses over Zero mark.
From the cryptocurrency trading example illustrated below, even though the Balance of Power showed the bitcoin price was oversold, bitcoin price continued moving downwards until the indicator crossed over to above Zero.
Technical Analysis in BTCUSD Trading
