Balance of Power: who won each bar, measured against its range

What it measures

Balance of Power scores each bar by the distance from open to close, divided by the distance from high to low.

That produces a number between plus and minus one describing who controlled the bar: plus one is a close at the high having opened at the low, minus one is the reverse.

It ignores the previous bar entirely, which makes it the purest single-bar sentiment measure on the chart and also the noisiest.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Subtract the open from the close.

2. 2

   Subtract the low from the high.

3. 3

   Divide the first by the second, guarding against a zero range on a flat bar.

4. 4

   Optionally smooth the result with a moving average, which most implementations do by default.

Settings

A smoothing period of around fourteen makes it readable. Without smoothing the line is dominated by single-bar noise and no reading survives to the next bar.

How to read it

• Sustained positive readings mean buyers have been closing bars near their highs, regardless of whether price went anywhere.
• The zero line is a genuine midpoint here, since the measure is symmetric by construction.
• Divergence works: price making new highs while the reading falls means the closes are getting weaker inside their ranges.
• The raw unsmoothed line is close to unreadable and should be smoothed before any conclusion is drawn from it.
• A useful pairing is against price direction: bars closing near their highs while price goes nowhere means buyers are absorbing supply without moving the market, which is a very different situation from buyers being absent. The smoothed line is the only way to see that reliably.

Where it misleads

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