Understanding Bulls Power and Bears Power Indicators
For traders seeking oscillators that generate clear buy and sell signals, the Bulls Power and Bears Power indicators are essential additions to Forex charts. Developed by Dr. Alexander Elder, these complementary tools reveal market momentum by quantifying buyer/seller strength.
Key Features:
- Bulls Power: Measures bullish (buyer) momentum strength
- Bears Power: Measures bearish (seller) momentum strength
- Often collectively called "Elder Ray indicators" (market X-rays)
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Calculation Methodology
Both indicators use a 13-day Exponential Moving Average (EMA) as their foundation - the standard period recommended by Dr. Elder.
Formulas:
- Bulls Power = High Price - 13-day EMA
- Bears Power = Low Price - 13-day EMA
Interpretation:
- Positive Bulls Power values indicate strong buying pressure
- Negative Bears Power values signal strong selling pressure
Practical Applications in Trading
These indicators help traders:
- Identify dominant market forces (bulls vs bears)
- Spot potential trend reversals
- Confirm price action signals
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Step-by-Step Chart Implementation (MT4)
Add the 13-day EMA:
- Insert → Indicators → Trend → Moving Average
- Set Method: Exponential, Period: 13, Apply to: Close
Plot Bulls Power:
- Insert → Indicators → Oscillators → Bulls Power
- Recommended color: Green
Add Bears Power:
- Insert → Indicators → Oscillators → Bears Power
- Recommended color: Red
Elder's Trading Methodology
Buy Signals (All Must Be True):
- Rising 13-day EMA
- Bears Power negative but approaching zero
Optional Confirmation:
- Higher Bulls Power histogram peaks
- Bullish divergence between Bears Power and price
Sell Signals (All Must Be True):
- Falling 13-day EMA
- Bulls Power positive but approaching zero
Optional Confirmation:
- Lower Bears Power histogram lows
- Bearish divergence between Bulls Power and price
Pro Trading Tips
- System Synergy: Always use both indicators with the 13-day EMA
- Rigorous Testing: Backtest and demo trade before live implementation
- Customization: Modify parameters cautiously with thorough testing
- Risk Management: Never risk more than 1-2% per trade
Frequently Asked Questions
Q: Can I use different EMA periods?
A: While possible, the 13-day EMA is optimal as per Dr. Elder's research. Significant deviations may reduce effectiveness.
Q: Are these indicators reliable standalone?
A: No - they work best as part of Elder's complete system including price action analysis.
Q: How do I identify divergences?
A: Look for price making higher highs while indicator makes lower highs (bearish divergence) or vice versa (bullish divergence).
Q: What timeframes work best?
A: These indicators perform well across all timeframes, though daily charts often provide the clearest signals.
Q: Can I combine them with other indicators?
A: Yes - they pair well with volume indicators, RSI, or MACD for additional confirmation.
Conclusion
The Bulls Power and Bears Power indicators offer traders a sophisticated yet accessible method to gauge market momentum. When combined with the 13-day EMA and proper risk management, they form a robust component of any technical trader's toolkit. Remember that consistent profitability requires patience, practice, and disciplined execution of your trading plan.
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