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Using the strength of bulls and bears power indicator, it is possible to identify in which direction the market is moving. Bear and bull power indicators in forex measure the power of bears (sellers) and bulls (buyers) to identify ideal entry points. Whenever the forex market is in a strong uptrend or downtrend, these power indicators can determine a trend’s strength. In our article, we will understand both bear and bull power indicators in detail. Selling on a downtrend by indicators of the strength of bulls and bears.

Two groups of traders are constantly present on the market, one of which is selling an asset and is known as the bears, whilst the other group of trader buying an asset are known as the bulls. Hence, this is where the terms bearish (down) and bullish (up) market come from. The balance of power between them is one of the important factors in determining the price dynamics of any financial instrument.

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If you have dark colors like dark green and dark red then you know volume is moving to the upside. If you have light colors like light green and light red volume is moving to the downside. These colors are irrelevant to the location of the bar meaning it doesn’t matter if the bar is liked or dark color above zero or below zero. If you get a dark color below zero you’re still moving up anyway because up is always up and down is always down. A bullish divergence occurs when the indicator is making higher highs while price is making lower lows. Traders can use this information to identify potential entry and exit points, as well as to confirm the direction of a trend.

• When bulls are more powerful, the prices are said to increase, and EMA slopes upwards.
• I’ve changed them to make them a little bit more intuitive for people.
• The low price is used in the formula because the bears push the quote down.
• The Bulls Bears power indicator can be used as an oscillator where buy/sell signals are triggered when the indicator crosses above and below the 0-line.

When the bears are more powerful, the prices are said to decrease, and EMA slopes downward. With the bear power indicator, the Elder Ray Index measures how low the market is trending, and with the bull power indicator, it measures how high it is trending. This is done by comparing the bulls and bears to a third measure known as the 13-day EMA, which acts as the value’s baseline. 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.

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On the NFLX chart below, you can see how strong Bull Power was during the runup from late January to late February which also pulled the Bear Power above the zero line. You can see a reversal of the two indicators in mid-March when NFLX price dropped. A trend is a direction in which the market or the price of an instrument is moving. Trends can be upward, downward or sideways and are common to all types of markets.

What we are looking at with the Bulls Power and Bears Power indicators is the distance between the EMA and the high/low. This corresponds with the influence of the bulls/bears to continue to push price past the EMA. Now that we understand the basics of the Bull Bear Power Indicator Formula, let’s explore how to use it effectively for trading. One of the simplest ways to use the Bull Bear Power Indicator Formula is to look for divergences between price and the indicator.

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Bull power indicators indicate the strength of bulls or buyers in the market. The indicator is responsible for determining if the current currency pair prices are higher than the previous ones, indicating that bulls are in a winning position. By estimating the relative strength of bulls against bears, the bull power indicator provides traders with ideal entry or exit points. It is also plotted on a histogram by subtracting the exponential moving average from the high price level of the currency pair. It indicates a buy signal when the histogram trends above the zero-price line, with the high price level being more than the exponential moving average.

Thus, this formula demonstrates the strength of the bulls in relation to the price averaged over a given time interval by the EMA method. The formula uses high-price, as the bulls push the quote up, based on which, they determine the maximum prices. https://investmentsanalysis.info/ It should immediately be said that this technical analysis tool consists of two parts. One is called bears power and calculates the strength of the bears, and the other is called the bulls power indicator and calculates the strength of the bulls.

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In the end, these forces interchange between one another and balance out the general price of the asset. Elder Ray Index is a technical indicator especially developed to identify the bull or bear power in the market. It consists of both a bull power indicator and a bear power indicator that help measure the strength of both in the forex market. This EMA line shows the average value of the trending price levels in the bullish or bearish trend. When bulls are more powerful, the prices are said to increase, and EMA slopes upwards.

• One is called bears power and calculates the strength of the bears, and the other is called the bulls power indicator and calculates the strength of the bulls.
• The Bull Bear Power Indicator Formula is a technical analysis tool used to measure the strength of bulls (buyers) and bears (sellers) in the market.
• Apart from the bulls bears Power indicator combination, the Elder-Ray indicator also uses the Exponential Moving Average (EMA) to calculate the strength of two sides of the trade.
• A bullish crossover occurs when the indicator crosses above the zero line, indicating a shift from bearish to bullish sentiment.

All information on The Forex Geek website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit Bull bear power or loss, and agree to hold The Forex Geek and any authorized distributors of this information harmless in any and all ways. Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more.

Bull and Bear Balance Indicator

If trend indicator is up-directed and the Bears Power index is below zero, but growing, it is a signal to buy. 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 function of a baseline is often performed by a 13-period Exponential Moving Average (EMA) of closing prices.

I share my knowledge with you for free to help you learn more about the crazy world of forex trading! The knowledge and experience he has acquired constitute his own approach to analyzing assets, which he is happy to share with the listeners of RoboForex webinars. Place a Stop Loss behind the local high on the price chart and take your profit when a strong support area is reached or some evidence of a reversal upwards appears. Place a Stop Loss behind the local low on the price chart and take your profit when a strong resistance area is reached or some evidence of a reversal downwards appears. After the signal forms, place a pending buy order (or enter by the market) a bit higher than the high of the last two candlesticks.