Balance of Market Power BMP

Balance of Market Power BMP

Not necessarily counting on the standard indicators, but a brief explanation is worth going back to Igor Livshin Balance of Market Power (BMP). It is a Oszialltoransatz based on the mapping of the two opposing market forces (bullish and bearish component) with the aim to quantify trend strength.

The relatively simple mathematical determination of BMP Livshin derives from three different components. He turns first to the ability of the bulls and bears - starting from the opening price periods - to achieve the desired extreme days. The result of (Open High minus) is divided by the Day's Range and credited to the cops, according to the result of (open minus low) Day's Range divided by the bears. The second component part is devoted to the ability of the two market forces that counteract each extreme of the other side. So, result (high minus Close) divided by the Day's Range for the Bears, the result (minus Low Close), divided by the Day's Range, for the bulls. Third Calculation component is a kind of bonus for winning each trading period within the power cord. If larger Close Open, a bonus goes to the cops, calculated from the result (minus Close Open), divided by the day's range. In the other case, the bearish forces benefit from a bonus, calculated from the result (minus Open Close), in turn divided by the day's range.


The value of Balance of Market Power is now by providing the difference between the averaged components bullish and bearish forces averaged (simple addition and division by three) with a moving average (usually 14 days). The relative complex derivation of BMP can not assume that the indicator value itself due to mathematical simplifications and reductions simply by dividing (minus Close Open) and (high minus low) can be determined.

Following the original concept, the indicator is drawn as a simple line, but there is also the possibility of auxiliary indicators such as Bollinger bands involved. The harder it will be shown wrest approach concrete trading signals. The inventor himself relies on two BMPs with different time horizons and the inclusion of trend lines in the shorter BMP. Signals can be traded only if the longer trend line breaks BMP confirmed in the respective direction. Another possibility Balance of Market Power is useful to use the popular search for divergences (for example, if the underlying forms or new lows, the indicator is not). Such divergence may indicate a weakening trend and possible trend reversal.