However, savvy traders know that these signals are not enough to make informed decisions. They combine the Bull Bear Power indicator with other technical analysis tools to confirm trends and generate more accurate signals. For instance, using the Bull Bear Power indicator in bull bear power conjunction with moving averages can help traders identify potential trend reversals. In the dynamic world of trading, understanding the Bull Bear Power concept is essential. This ingenious indicator, created by Dr. Alexander Elder, measures the strength of buyers (bulls) and sellers (bears) in the market, providing traders with valuable insights.
- – If the bull power indicator shows greater strength, place a long order (buy).
- This could be a bullish signal, indicating a potential buying opportunity.
- Elder-Ray is best used with other forms of fundamental or technical analysis and not as a standalone tool.
- If the indicator value goes above or below the zero line, it shows that one market force dominates the other.
This website is operated by TM Trading Ltd, an entity regulated by the Seychelles Financial Services Authority (FSA) with License No. The value of your portfolio can go down as well as up and you may get back less than you invest. Investing in Stocks, Commodities & Currencies may not be right for everyone. There is a difference of just over 20 pips between the second and third price highs. This difference would have led to a drawdown if you had opened a short position after the second high. In 24 hours, the trade generated more than 2.5 USD in a strong uptrend.
Using the Indicator
- If the price continues to rise due to the momentum in the market, it is a divergence – a reinforcing signal confirming the imminent reversal to the downside.
- Together, these indicators are referred to as the Elder-Ray Index.
- Mathematically, bull power is derived by subtracting an exponential moving average, like a 13-day EMA, of closing prices from a high price of any given security.
- The first target is located in the middle of the channel (the first blue line).
- There are some very specific conditions you need to look for when using the Elder-ray in making buying/selling and shorting/covering decisions.
- On the other hand, a bearish divergence happens when the indicator is falling while prices are rising, hinting at a possible downward reversal.
Dr. Alexander Elder named his first indicator Elder-Ray because it is designed to see through the market like an X-ray machine. Developed in 1989, the indicator can be applied to any security chart. Elder-Ray helps traders determine the strength of competing groups of bulls and bears by looking for data that may not be immediately analyzed.
Bull Power indicator in Crypto
In our article, we will understand both bear and bull power indicators in detail. When the strength of the buyers increases, the strength of the sellers decreases accordingly and vice versa. Most often, both indicators are placed on the chart at the same time, as they confirm each other’s signals and the signals generated by trend indicators. Bulls Power and Bears Power are oscillator-type indicators that show the strength of buyers and sellers on different time frames. The indicators take into account the asset’s high and low prices as well as 13-period exponential moving average.
Mathematically, bull power is derived by subtracting an exponential moving average, like a 13-day EMA, of closing prices from a high price of any given security. Bear power subtracts the EMA from the corresponding low price of that trading day. Both bull power and bear power values are plotted as histograms under the bar chart of a chosen security. The Bull Bear Power indicator is a powerful tool that can help traders make informed decisions, but it should not be used in isolation. It is most effective when used in conjunction with other technical analysis tools and indicators. By understanding and effectively using Bull Bear Power, traders can gain an edge in the market, increasing their chances of making profitable trades.
Take Your Trading to the Next Level with Forexopher Services
For instance, a high Bull Power coupled with a low Bear Power suggests a strong bullish market, which may be an ideal time to enter long positions. Conversely, a high Bear Power coupled with a low Bull Power indicates a bearish market, suggesting it may be time to short. When the histogram is above zero, it signals that the bulls are in control, representing a potential buying opportunity. Conversely, when the histogram is below zero, it indicates that the bears have the upper hand, suggesting a possible selling opportunity. If the indicator is above zero, it suggests that bulls are in control and it may be a good time to consider buying.
An increase in Bears Power, on the contrary, indicates that there is an increase in sales in the market, so the price will decrease. The indicators are based on the 13-period exponential moving average as recommended by Dr. Alexander Elder. If the buyers’ power grows, the sellers’ power should fall accordingly. In this case, Bulls Power goes to its maximums, and Bears Power, on the contrary, tends to the zero line. Bears Power will go lower in the negative zone, Bulls Power will move to the zero line.
What Is the Kelly Criterion in Trading and How to Use It for Investing
It is often advisable to apply these indicators together with a trend indicator such as moving averages in order to seek a confirmation of the trend’s direction. As previously discussed, there are two main market mind-sets, bullish and bearish, and this indicator measures the actual strength of these market sentiments. The difference lies in the calculation formula and in what the indicators display. Increasing values of the Bulls Power indicator says that buyers prevail in the market.
Always use this tool as part of a comprehensive trading strategy that includes risk management. Bull Power is most effective when used in conjunction with a trend to identify potential buying opportunities. When Bull Power is positive, it indicates that buyers are in control and the market is likely to rise.
When the Bull Power line crosses above the moving average, it can be a bullish signal. On the other hand, when the Bear Power line crosses below the moving average, it can be a bearish signal. Both signals indicate that the strength of the sellers is weakening and a long position can be opened. The first target is located in the middle of the channel (the first blue line).
By estimating the relative strength of bears against bulls, the bear power indicator provides traders with the ideal entry or exit points. It is plotted on a histogram by subtracting the exponential moving average from the lowest currency pair price. It indicates a sell signal when the histogram trends below the zero level and the low-price level is lower than the exponential moving average. On the other hand, it indicates exit signals when the histogram trends above the zero level and the low price is more than the exponential moving average. The bear power indicator measures the strength of bears or sellers in the market. It shows if the current currency pair prices are lower than the previous ones, indicating that bears are in control.
For bear power signals, you may consider selling when the histogram (bars located at the bottom of the chart) moves below zero and the low price is lower than the EMA. Conversely, it can also indicate exit signals when the histogram rises above zero and the low price moves above the EMA, indicating that the price is increasing. This indicator is plotted on a histogram by subtracting the exponential moving average (EMA) from the lowest currency pair price. A sell signal is generated when the histogram trends below the zero level, with the low price lower than the EMA. Conversely, an exit signal is indicated when the histogram trends above the zero level, and the low price exceeds the EMA, suggesting rising prices.
