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"How to Use Balance of Power Indicator Properly" 

List of Balance of Power Indicator Tips

TC2000 Users have a huge advantage over Traders who do not use this charting program. Unfortunately most TC2000 Users are not taking full advantage of tools embedded in this program. One of the many tools that are unique to TC2000 is the Balance of Power Indicator. This indicator continues to evolve and change as the Market Structure changes, making it one of the most powerful indicators ever written.

Regardless of whether you use MACD, ADX, Bollinger Bands, RSI or other popular indicators, adding Balance of Power to what you use will change how you interpret charts, analyze stocks, and select stocks to trade.

Go to the Balance of Power webinar and learn how to track large lot vs small lot activity, which patterns represent Dark Pool Buy Zones, pattern that indicates bottom formation, and how to use indicator to get into a stock ahead of huge gap or run.

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For most Traders, Balance of Power makes no sense at all. That is because they have only read the basic information in Worden Help Files, and have not been trained on how to use Balance of Power in the modern automated markets, which is exactly what it was designed for.

Balance of Power is a leading indicator IF you learn to read it properly.

Here is a List of Balance of Power Indicator Tips To Get Started:

1. Just assuming red means distribution and green means accumulation, is an oversimplification of this sensitive and extremely powerful indicator. It is one of the longest formulas every written with 3.5 pages of algorithms. The Stock Market has splintered into 72 venues with some lit and some dark, and 9 Market Participant Groups. Therefore red versus green analysis is just the beginning. Traders need to know which Market Participant Group forms that particular red or green Balance of Power Pattern.

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"Volume Indicator Training Webinar"

2. The length of the Balance of Power bars MATTERS. How long the bars are tells you which Market Participant Group is buying or selling, and that reveals important information in relation to how Price and Volume are behaving. As an example blasting long red Balance of Power in a Bottoming Formation is not giant Buy Side Institutions using Dark Pools, instead it is Smaller Funds using Volume Weighted Average Priced triggers.

3. Where in the Trend it is that Balance of Power turns green or red MATTERS. Different Market Participant Groups buy and sell at different locations in the Trend, based on their access to pertinent information. Some Market Participant Groups have access BEFORE the rest of the groups hear about it. So those groups are buying or selling ahead of the others.

4. To properly interpret Balance of Power you must use not only Balance of Power, but also Volume Bars, and Price Patterns in combination. When you use all three together, the jigsaw puzzle suddenly becomes a viable picture that makes sense. The chart example below shows this Relational Technical Analysis™ that gives Balance of Power logical sensible interpretations which Traders can use to enter a stock before huge gaps and runs.

The chart example below shows the Relational Technical Analysis which gives the Balance of Power indicator logical and sensible interpretation, that Traders can use to enter a stock before huge gaps and runs.

How to use TC2000 Balance of Power Indicator - TechniTrader

The chart example is a rounding Bottom Formation, which is common for Dark Pool Quiet Accumulation. Bottoms of this kind take several months to complete, and can have gaps or sudden runs that provide excellent profits for Swing and Day Traders.

The Relational Analysis of Balance of Power, Volume Bars, and Price Patterns tell us early on what is happening, way ahead of the gap due to High Frequency Trading filling the queues pre-market on the day of the gap. The Dark Pools are quietly accumulating while Smaller Funds who use Volume Weighted Average Price trigger orders are still dumping the stock, unaware that they are selling into a Dark Pool Buy Zone™ price range.

What tells us this is a Dark Pool Buy Zone is that the extremely long red Balance of Power which is Volume Weighted Average Price orders of Smaller Funds selling, does not drive Price down. Instead Balance of Power bars turn gray and are very short suddenly and intermittently as Dark Pools go head to head against the Volume Weighted Average Price orders, buying incrementally over time.

Volume spikes high above the Exponential Moving Average only when High Frequency Trading orders trigger again, attempting to sell the stock down but failing to move it beyond the lows of the Buy Zone. Then as Smaller Funds selling evaporates, the Shift of Sentiment™ forms on Balance of Power as indicated by the red and green arrows. This is a trader’s signal that a Momentum Run is imminent. High Frequency Trading gaps the stock up on high Volume and high green Balance of Power. Smaller Funds chase them, as their Volume Weighted Average Price orders always trigger after an High Frequency Trading huge Volume spike. 

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Learning to read Balance of Power properly is not hard but it requires an understanding of the relationship between Balance of Power Indicator Patterns, Price Patterns, Volume Bars, Trend, and Market Conditions.


The Gold Standard in Stock Market Education

Trade Wisely,

Martha Stokes CMT

Chartered Market Technician
Instructor and Developer of TechniTrader Stock & Option Market Courses

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