About the Balance of Power Indicator
The Balance of Power Indicator for MT5 is a momentum-based tool developed by Igor Livshin to measure the strength between buyers and sellers.
It evaluates how effectively each side pushes price toward its extremes, giving insight into market control.
The indicator oscillates between -1 and +1, where positive values reflect buying pressure and negative values indicate selling pressure.
It can also be smoothed using a moving average to reduce noise and improve signal consistency.
One of its key characteristics is how it behaves during trends.
In strong bullish markets, it tends to remain near the upper range, while in bearish markets, it stays near the lower range.
This behavior helps traders confirm trend direction and identify potential reversals.
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Balance of Market Power.ex5 (MT5)
Key Features
- Measures the strength of buyers versus sellers.
- Oscillates between -1 and +1 for easy interpretation.
- Supports divergence analysis and trend confirmation.
- Optional smoothing using moving averages.
- Highlights overbought and oversold conditions.
- Adapts to different timeframes and market conditions.
Indicator Chart
The Balance of Power Indicator appears beneath the price area as a histogram that fluctuates around the zero level.
The chart shows how the bars change color and direction, helping traders identify shifts in market pressure and potential entry points.
Guide to Trade with Balance of Power Indicator
Buy Rules
- Wait for the histogram to break above the zero level.
- Confirm increasing bullish strength with rising bars.
- Look for consistency in positive momentum.
- Enter a buy trade at the next candle open.
Sell Rules
- Wait for the histogram to drop below the zero level.
- Confirm growing bearish pressure with falling bars.
- Look for sustained movement in negative territory.
- Enter a sell trade at the next candle open.
Stop Loss
- Place stop loss based on a fixed risk-to-reward ratio such as 1:1 or 1:2.
- Set stop loss beyond recent price rejection zones.
- Reduce position size instead of widening stops excessively.
Take Profit
- Close buy trades when the histogram crosses back below the zero level.
- Close sell trades when the histogram crosses back above the zero level.
- Alternatively, take profit at predefined risk-reward targets.
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Balance of Market Power.ex5 (MT5)
FAQ
What does the zero level represent in the Balance of Power Indicator?
The zero level acts as a dividing line between bullish and bearish pressure.
Values above zero indicate buyers are in control, while values below zero show sellers are dominant.
Can the Balance of Power Indicator show divergence?
Yes, it can highlight divergence between price and momentum.
This can signal potential reversals when price moves in one direction while the indicator moves in the opposite direction.
How does smoothing affect the indicator?
Smoothing reduces noise and makes signals more stable.
However, it may slightly delay entries compared to the raw version.
What does clustering near extremes mean?
When the indicator stays near its upper or lower limits, it reflects strong trend conditions where one side consistently dominates the market.
Summary
The Balance of Power Indicator offers a focused view of market strength by comparing buyer and seller influence.
Its simple histogram format makes it easy to track momentum shifts and confirm trends.
It performs effectively across multiple timeframes and supports both trend-following and reversal strategies.
The ability to detect divergence adds further depth to trade analysis.
When combined with additional confirmation tools, it can enhance decision-making and improve overall trading consistency.
