Balance of Power Indicator: A Practical Guide for NSE Traders

What the Balance of Power Indicator Actually Measures

The Balance of Power (BOP) indicator was developed by Igor Livshin and introduced publicly in 2001. Its raw formula is (close − open) / (high − low). For valid price bars with nonzero range, values lie between −1 and +1.

Raw BOP describes one bar. A positive value means its close is above its open, relative to its range; it does not establish an uptrend or identify who traded. A smoothed version reflects several bars.

Check the price data and selected timeframe. Thin trading or unusual prints can affect the high-low range, but a particular stock name does not guarantee reliable signals.

Where Balance of Power came from

Igor Livshin published the indicator in the August 2001 issue of Technical Analysis of Stocks and Commodities magazine. His idea was to judge each bar by asking who finished stronger, the buyers or the sellers, using only that bar's own prices. Software vendors describe it the same way today. We could not open the original article, so the history here rests on vendor documentation, and details such as the exact original smoothing wording may differ between sources.

The name can mislead. BOP does not see orders or who placed them. It compares where the bar closed with where it opened, in proportion to the bar's range. The label "buyers versus sellers" is a way to picture a rising or falling body, not a measurement of participants.

The BOP Formula, Step by Step

The top of the fraction, close minus open, is the candle body’s signed price change. A close above the open is positive; a close below it is negative. The bottom, high minus low, is the full range. Dividing them shows the body’s direction and size relative to that range.

Illustrative comparison: the same ₹30 open-to-close gain gives BOP 0.75 with a ₹40 range and 0.20 with a ₹150 range. This measures body-to-range proportion, not observed participant conviction.

Reading +1, 0 and -1

• +1. The close equals the high and the open equals the low, so the body fills the whole range upward. Made-up bar: open 100, low 100, high 110, close 110. Close minus open is 10 and the range is 10, so BOP is 10 ÷ 10 = 1.
• -1. The mirror case: open at the high and close at the low. The body fills the whole range downward.
• 0. The close equals the open, for example a doji candle with a nonzero range. The body is zero, whatever the length of the shadows.
• In between. A value of +0.5 means the body covers half of the range, upward. The shadows take the other half.

Readings near the extremes are rare on real bars, because few bars open exactly at one end of the range and close exactly at the other. So do not wait for +1. A reading above or below zero only tells you the direction of that bar's body, and its size tells you how much of the range the body filled.

Illustrative Reliance Calculation

Assume a made-up Reliance bar: open ₹1,418, high ₹1,442.40, low ₹1,411.20 and close ₹1,438.90. None is a live or historical quote.

The example body is ₹20.90 and range ₹31.20, giving BOP about +0.67. The close is ₹3.50 below the high. These calculations do not reveal the intrabar path or earlier BOP readings.

Separate invented red bar: open ₹1,439, high ₹1,445, low ₹1,402 and close ₹1,409.50. Its body is −₹29.50 and range ₹43, giving BOP about −0.69. A change of sign does not guarantee a reversal.

Is Balance of Power a volume indicator?

No. The formula uses open, high, low and close, and has no term for traded quantity. Two bars with identical prices give identical BOP, even if one traded ten times the volume of the other. This is a major difference from volume-based tools.

Be careful with the common labels. Many articles put BOP in the group of indicators that show buying and selling pressure. That describes how people read it, not what it uses. If you want the volume side, add a volume study and compare the two.

Reading BOP Histograms and Crossovers

BOP can be displayed as a line or histogram. Positive and negative signs describe body direction, and magnitude describes its share of the bar’s range. A raw crossing is not a complete trading rule.

Persistence and divergence are observations across bars. They do not prove a coming breakout or reveal hidden buyers and sellers.

Smoothing Choices

A moving average can smooth BOP, adding lag. Check the platform’s actual calculation and lookback; no universal Indian-market default or optimal setting is verified here.

• Identify whether the displayed series is raw or smoothed.
• Record its lookback and chart timeframe.
• Check gaps, missing bars and equal-high/low handling.

Why raw BOP is noisy and how smoothing helps

Raw BOP is recalculated on each bar from that bar alone, so it can swing from positive to negative from one bar to the next. A moving average of the last few raw values smooths that jumping, at the cost of lag. Vendor documentation says BOP can be smoothed with any type of moving average, and that a 14-period average is recommended for daily charts, though the right number depends on the market and the timeframe.

Made-up example with a five-bar simple moving average (SMA). Five raw readings are +0.67, -0.20, +0.40, -0.55 and +0.30. They add up to 0.62, and 0.62 ÷ 5 is about +0.12. The raw series changed sign four times, while the average stays slightly above zero. An exponential moving average (EMA) gives more weight to recent bars. For five bars its weight on the newest value is 2 ÷ (5 + 1), about 0.33, so it reacts faster than the SMA but still lags.

• A shorter period reacts quickly and stays noisy.
• A longer period is calmer but turns later.
• Test any setting on the same data and include failed signals and costs.
• Write down the period you use and keep it fixed while you test.

No setting is proven best for NSE stocks. Pick one, record it in your journal and judge it by results over many trades, not by how smooth it looks.

Combining BOP with Trend and Volume

A moving average and BOP can describe related price features. Their agreement does not establish independent confirmation or a higher win rate.

Volume is absent from the BOP formula. Adding it can provide context, but a strong BOP reading with heavy volume does not prove who participated or what happens next.

• Compare the indicator with the actual price bars.
• Check whether other indicators reuse the same prices.
• Distinguish descriptive agreement from tested performance.

BOP versus volume delta and money flow

Close location in the range is not the same as body direction. For the invented Reliance bar above (open 1,418, high 1,442.40, low 1,411.20, close 1,438.90), BOP is +0.67. The close location value used in money-flow tools is ((close - low) - (high - close)) ÷ (high - low) = (27.70 - 3.50) ÷ 31.20, which is about +0.78. Both are positive, but they answer slightly different questions, and CMF would then multiply by volume.

Volume delta needs data that separates trades by side, which is not available as an ordinary bar chart. Use each tool for its own question and do not treat them as copies of each other. The Chaikin Money Flow guide covers the volume-based side.

BOP and Option Exposure

BOP on futures describes futures bars. An option’s premium also depends on strike, expiry, volatility and its own order book. A bullish BOP reading is not a premium forecast.

Do not infer profit from the indicator alone. A gross premium change needs actual quantity and charges before an after-cost result can be known.

Tax Records

The indicator used does not establish income classification or a tax rate. Preserve the trade, settlement and cost records.

Ask a qualified tax adviser about classification, expenses and loss rules for the relevant period. No after-tax trade result is calculated here.

Reading BOP Across Different Market Conditions

An upward trend can contain negative-body bars. Raw BOP depends on open and close, while a trend may be measured close to close. Do not assume the two must agree.

In a range, raw signs can change frequently. A gap from the previous close is not explicitly included in raw BOP: a positive bar can still close below the prior session.

Spotting divergence with BOP

Divergence means price and the indicator disagree. A common description: price makes a higher high while smoothed BOP makes a lower high, which would mean the bodies behind the new high were weaker. The mirror pattern is a lower low in price with a higher low in BOP.

Treat this as a description and not a signal. Divergence can last a long time while the price keeps moving the same way. Use a smoothed series, because raw BOP gives false divergences. If you test it, write rules before looking at the results: what counts as a swing high, how many bars apart, what confirms it, and where the plan is wrong. Then count the hits and misses in your journal, including costs.

We found no single exact divergence rule from the indicator's author, so treat the description above as general, not as his rule. The intraday indicators guide shows how to compare indicators on the same chart.

Limitations and Common Mistakes

A single strong bar does not establish a trend. A small body in a wide range can produce a low BOP magnitude even if activity was intense; the ratio does not measure traded volume.

• Check nonzero range before division.
• Avoid inferring trader identity from candle geometry.
• Distinguish raw bars from smoothed output.
• Review the previous close separately when analysing gaps.
• Include actual executions and charges in performance reviews.

BOP is a compact description of candle-body direction and relative size. Keep that calculation separate from claims about future price movement.

Related context: CMF’s use of volume, intraday indicators and option premium.

Sources

• TradingView: Balance of Power definition (checked 16 Oct 2026)