Dr Alexander Elder, author of the “Trading For A Living” book is the developer of the Elder Ray Bull & Bear Power indicator. This indicator spouts forex signals according to the status of it’s three components – the bull power, bear power and a 13 period exponential moving average. We examine this interesting forex indictor in more detail below.
Interesting Forex Indicators – Elder Ray Bull & Bear Power
The highs and lows of the price are the key in using this particular forex indicator. When we see a price high, this is said to be the highest available power that the bull side of the market can muster. Similarly, the lowest price is the greatest bearish power that the negative side of the market is able to deliver. The EMA (Exponential Moving Average) is the general price consensus as determined by the forex market (known as the consensus of value). When using this indicator, The bull and bear power are calculated in the following way:
Bull Power – This figure is derived by subtracting the 13 period EMA (Exponential Moving Average) from the price high.
Bear Power – This number is obtained deducting the 13 period EMA from the price low.
So, the Bull Power represents the greatest possible pull of the bulls to increase price action over and above the average consensus of value. The bear power is the greatest ability of the bears to drag down price action to below the average consensus of value.
How To Interpret The Elder Ray Bull & Bear Power. Typically, we would expect the bull power to remain positive and the bear power to stay in the negative. In the event that the bull power dips into negative territory, it suggests that the market has turned bearish. Similarly, should the bear power turn positive, it indicates that the market is entering a bull phase.
Here are some additional tips in trading the Elder Ray Bull & Bear Power forex indicator:
- Exponential Moving Average Should Be Used To Decipher General Trend Direction. The direction of the EMA and its gradient should provide the trader with additional clues on the trend direction and aggression.
- Look for Divergences. This indicator is ripe to pick out divergences on. Forex buy signals will be generated on bullish divergence – this is when there is a bullish divergence seen between the bear power and price action (the price makes consecutively lower lows, while the bear power makes higher lows). In contrast, forex sell signals are produced when bearish divergence is seen between bull power and price action. For this signal, look out for the Bull Power making lower highs while price action makes higher highs.
- Conditions For Buying Using This Forex Indicator. For there to be a buy signal, the EMA should confirm an uptrend and the Bear Power should be in the negative but moving upwards. Ideally, the most recent Bull Power peak should be greater than it’s previous peak.
- Conditions For Selling. A sell signal is generated when the EMA confirms that prices are trending downwards, and the Bull Power is in positive territory but declining. Ideally, the latest bear power price low should be lower than the one preceding it.
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