Bulls Powers and Bears Powers Indicators

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Bulls Power and Bears Power are two oscillators derived by Dr. Alexander Elder. These indicators indicate Bulls and Bears powers balance. Respectively, Bulls Power shows a behavior of the upward momentum and Bears Power illustrates the behavior of the downward momentum.

Description

Psychological background of the market, in which Dr. Elder is a proven expert, interpret market movements as a moment to moment struggle between Bulls, which are the market buyers, and Bears, a nickname for the sellers. Elder decided to show the power of upward momentum and power of downward momentum separately.

Bulls Power

Again, Bulls Powers show a balance of the Bulls powers regarding the recent period. The indicator base is the ratio of the Moving Average and the bar highs. The higher the bar high above the corresponding value of the MA – the stronger Bulls power. In the uptrend, highs of the bars are higher than MA, so the Bulls Power is above zero. If highs fall under the MA when prices are dawning, Bulls Power becomes below zero and its histogram falls under zero line.

Bears Powers

Correspondingly, Bears Powers illustrate fluctuations in downward momentum. As well as the Bulls Powers the indicator is calculated by the relation between MA and price lows. The lower the price lows below the MA – the stronger the Bulls power.  In the downtrend, low of the bar is lower than MA, so the Bears Power is below zero. If LOW rises above MA when prices grow, the Bears histogram rises above zero.

Bulls Powers Bears Powers 0

History

Famous trader and psychologist Alexander Elder described derivation and usage of the Bulls Power and the Bears Power Indicators in his book: Psychology, Trading Tactics, Money Management. New York: J. Wiley, 1993.

Calculations

Both indicators are derived as the difference between price highs and lows and Exponential Moving Average of the price. Elder recommended using 13 periods EMA.

BULLS = HIGH(i) – EMA(i)

BEARS = LOW(i) – EMA(i)

HIGH(i) — high of the bar i;

LOW(i) — low of the bar i;

EMA(i) — value of the EMA of the bar i, by the convention 13 periods EMA;

Interpretation

Elder, in his book, recommends to use this Indicators along with trend indicators, MA, Parabolic SAR etc. For example, Parabolic SAR serves as a trend indicator.

Buy signal

  • Parabolic SAR changed indications from downtrend to uptrend
  • Bears Power still below the zero but rising regarding it last pick

Bulls Powers Bears Powers 1

Sell signal

  • Parabolic SAR changed indications from uptrend to downtrend
  • Bears Power still below the zero but rising regarding it last pick

Bulls Powers Bears Powers 2

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