Forex Trading Wisdom

Balance of Power (BOP) In this article, I’m going to talk to you about balance of power, or BOP©. BOP tells us whether the underlying action in the trading of a stock is a characteristic of systematic buying accumulation or distribution. Look at Figure 1 for a classic BOP example: it’s plotted by looking at the accumulation that occurs above or below its zero line, which I call a level line or center line. It represents this institution’s buying and selling of shares totaling 10,000 or more. The more buying you have, the higher the stock will go; and, the more selling you have, the lower the stock can go. And of course, if you have a lack of buying or selling, it’s neutral, which often is a sign that the stock will trend sideways until the buying or selling increases. FIGURE 1 If someone were to buy or sell 100,000 shares of one individual stock, would it make a difference in the price of that stock? Definitely. I’m now going to tie this together with some other techn...

Moving Averages A moving average is the sum of whatever you’re examining. In this case, I’m talking about the closing prices of a stock. For example, a 20–, 30–, 50–, 100–, or 200-day moving average is then divided by the total number of days, resulting in the average price of the stock. A 30-day period is commonly used for short-term buy and sell signals. As stocks move above the 30-day moving average, it’s said that the stock has greater upside potential; and, as the price drops down below the 30-day moving average it’s said that the stock has greater odds of moving lower at that time. Such moving averages are helpful when determining levels of support and resistance. As a habit, I have found that once a stock drops below the 30-day moving average, it may be best to place a stop loss order at a select price. I’ll talk more about this later 9 as I go into the details using the Average True Range (ATR) indicator. Also keep in mind that of all the various moving averages, the 200-...