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