Bulls & Bears Power indicators - Key takeaways
Bulls and Bears Power indicators are used in trading to measure the strength of trends in trading. Bulls power measures the strength of buyers’ position and Bears power measures the sellers’ position.
The two indicators were developed by Dr. Alexander Elder who, by combining a 13-day Exponential Moving Average to these indicators, created the Elder-Ray index. When a trader uses the Elder-Ray index to observe the prices, they get signals to either buy or sell an asset.
The signal to buy an asset occurs when the 13-day EMA (baseline) is increasing, while the Bulls power is negative but increasing. The signal to sell an asset occurs when the EMA is decreasing, while the Bears power is positive but decreasing. These individual indicators are available in MetaTrader 4 on default and can easily be applied to the chat.
FAQ on bulls and bears power indicators
1.What does bulls and bears power mean?
In trading, as well as any other market, there are two essential participants: buyers and sellers. Buyers create demand for a given product/service, whereas sellers supply those to the market.
In trading terms, buyers are called Bulls, and sellers are called Bears. Bulls are always trying to buy assets at the lowest possible price, while Bears want the highest selling price for their assets.
The Bulls and Bears power for beginners, therefore, is quite simple to understand: these indicators are put on the chart in order to measure just how successfully buyers (Bulls) and sellers (Bears) are managing to buy/sell their assets at preferred prices.
2.Which software offers bulls and bears power indicators?
Bulls and Bears power oscillators are among the default indicators in many pieces of software, including MetaTrader 4/5, cTrader, etc. That’s because these indicators are very often used to receive signals as to when to buy or sell an asset.
In MT4, it is very easy to put these oscillators onto the chart. All a trader needs to do is go to the “Insert” menu at the top-right corner of the screen, go down to “Indicators”, choose “Oscillators”, and select “Bulls Power” and “Bears Power”. These are two different indicators, yet to use them most effectively, it is better to use them in a combination.
Plus, to complete the Elder-Ray set, traders can also put the Exponential Moving Average indicator to the chart. This way, there will be a 13-day baseline that will indicate whether the average price has been increasing or decreasing for the past 13 days, while the power oscillators will measure the strength of those trends.
3.How to interpret Bulls and Bears power indicator signals in trading?
As noted in the article, it is better to use Bulls and Bears power indicators with the Exponential Moving Average. Usually, the EMA is plotted for 13 days as a baseline.
So, as a rule of thumb, the Elder-Ray indicator gives out the buy signal when the following conditions are met:
- The EMA is increasing
- The Bears power is negative but increasing
Conversely, the sell signal occurs when the following conditions are met:
- The EMA is decreasing
- The Bulls power is positive but decreasing
These are the two most essential conditions for each signal; when they occur, the Elder-Ray index gives out the signal to make a corresponding decision.