The BoP oscillator is used to measure the strength of buyers and sellers. This is by analyzing their ability to drive prices higher or lower. It works by taking the simple moving average (SMA) of the close minus the open divided by the high minus the low.

<BoP Image retrieved from thinkorswim>

Intermediate: Understanding the Balance of Power

This SMA of the range of the candle divided by its high shows how tall the candles are relative to their range. Therefore, the BoP not only shows bullish sentiment above the zero line, but that the bullish candles are strong, and vice versa. In general, if the BoP stays strong on one side of the zero line, then it implies that the current trend will continue.