The Bull Power and Bear Power are the oscillators developed by Dr Alexander Elder. They measure the power of buyers (bulls) and sellers (bears) to push the price in their favor, i.e. above or below a baseline. The two indicators combined are known as Elder-Ray Index. The function of a baseline is often performed by a 13-period Exponential Moving Average (EMA) of closing prices.
It reflects the behavior of buyers and sellers in the market during a certain period of time. If the indicator hovers near the zero line, there is balance in the market – neither party prevails, demand is balanced with supply, and the price does not change. If the indicator value goes above or below the zero line, it shows that one market force dominates the other. The Bull and Bear Power oscillator was developed by Alexander Elder. It determines the strength of buyers (bulls) vs. sellers (bears) as it measures the difference between the highest price and a 13-period EMA, plotted as a histogram. Divergences between bull or bear power and prices indicate the best trading opportunities using the Elder-Ray indicator.
Bulls power & bears power trading strategy
The factors in question are quite sensitive to market volatility. Bulls power and bears power indicators can be used well together. The core benefit of these technical indicators are that they can be used to identify the strength of trend. However, you may pre-empt the reversal of a trend quite early through divergence. On the evening of June 26, 2024, here is how the EUR/USD currency pair on the H1 time frame looked like. In addition to the bull and bear power indicators, the Bollinger Bands channel indicator with default settings was added to the chart.
The length of the histogram column, in turn, depends on the difference in price levels of the low and high of the current candle and the average price. Therefore, it is common to compare the lengths and column layouts of each indicator. All in all, the Bulls/Bears Power indicator allows seeing the forces that are driving the market and suggest a simple but efficient basis for a trading strategy. All 3 indicators form a kind of basis for a trading strategy. One of the popular classic Forex strategies is trading using moving averages.
AUD/USD: Analysis of the Current Trend and Expert Forecasts for 2024
If trend indicator is down-directed and the Bulls Power index is above zero, but falling, it is a signal to sell. The Bull Bear Power (BBP) indicator, otherwise known as the Elder-Ray Index, estimates the relationship between the strength of bulls (buyers) and bears (sellers) on an instrument. When the indicator’s value is nonzero, it supposedly suggests that either bulls or bears have more power in the market. The greater the distance is from zero, the greater the apparent dominance of bulls or bears. Positive values indicate higher bull power and negative values indicate higher bear power. The bear-bull power indicator is located in the oscillator block on the MetaTrader 4 platform.
Further reading
Therefore, the next candle could be a buying signal. Bull-bear power indicator has many tangible advantages for traders. The main ones are the ease of using the charts and the relative simplicity of analysis.
The bearish signal points to the possibility of opening a long position if it is below the zero line. If the bull’s strength is above the zero line, it is possible to open a short position. The first step is to install this instrument in the trading terminal and launch it. The tools open in a separate window and are located below the main chart.
Preguntas frecuentes sobre indicadores Bulls Power y Bears Power
- Let’s take the GBP/USD currency pair on the H1 time frame.
- On most trading platforms, bull and bear power indicators are the main parameters for analyzing market trends.
- As a result, we should expect a significant price increase.
- To understand what a bull-bear power indicator is, it is important to know who are the bulls and bears.
High-quality market research requires analyzing a lot of information, which is why the best Forex robots will be useful. All this helps create the most accurate forecasts. The bulls power and bears power indicators are flexible to differing market conditions, thus can be used as part of a forex trend trading strategy and forex range trading strategy. However, notice that the bulls and bears indicators may lag like any other statistical indicator. The confrontation between bull/bear power often dramatically changes asset prices. That’s why traders need to know who is dominating the market.
For example, they can be found in the oscillator block on the MT4 platform. In the settings, you can also specify the type of price used in the calculation formula and the type of MA. There are eight price variants, four main open-high-low-close (OHLC) prices and four additional ones. In addition to the EMA, you can set a simple moving average (MA), as well as linearly weighted (LWMA) and smoothed (SMMA) moving averages. The Elder-Ray index is called the Bull Bear Power indicator.
How to Trade with Bulls Power and Bears Power Indicators?
- FXOpen has announced that it will no longer support STP trading accounts starting from December 20, 2024.
- They help estimate the current power balance of buyers and sellers and catch the moment when bears/bulls are getting weaker.
- On the D1 and higher time frames, it takes a long time for a confirming signal to emerge.
- So bulls and bears are not only a representation of two opposing approaches to working in the financial markets.
- However, it requires patience and a properly placed stop-loss order.
- Bear power is typically negative, so if it turns positive, the bulls have taken control.
One of the signals of an upcoming trend change is a reversal of the balance in the market. Indicators that show the strength of bulls and bears in the market are the main ones that a trader focuses on. They help avoid trading mistakes and build successful strategies for working in the market.
It allows you to choose the type of price that is taken into calculation. There are four main types – OHLC, and three additional types – Median, Typical, and Weighted Close prices. On the LiteFinance platform, you can also specify the type of moving average.
The widening channel indicates the growth of the amplitude of the price movement in relation to the median. When the price has moved far away from the median, we should wait for a trend reversal. However, channel trading alone involves a high degree of risk as the price can break through the channel boundaries. Therefore, it requires a confirming signal generated by an oscillator. An interesting piece of history surrounding the Bull Bear Power Indicator is that it was first presented by Alexander Elder in the 1980s.
Three most effective trading indicators for Forex traders
The bull-bear power indicator is the most commonly used by investors to confirm a trend. At the same time, these factors are somewhat interrelated. If the strength of sellers increases, the influence of buyers on the market decreases, and vice versa. The chart usually shows these two indicators simultaneously. The bull-bear Bull bear power power indicators are quite effective and understandable for traders.