This is a new technical indicator, which helps in identifying the power of bulls and bears in a market. The Elder – Ray combines several things, such as:
- Price – Each price is a momentary consensus of value.
- Moving average – Moving averages show the average consensus of value.
- The lows and highs of each end bar – The high shows the maximum power of bulls during that bar and the lows show the maximum power of bears during that bar.
We shouldn’t buy when bear power is positive, and the best time to buy is when bear power is negative but rising.
On the other hand, we shouldn’t short - sell when bull power is negative, but the best time to sell is when bull power is positive but falling.
Divergences between the powers of bulls and bears combined with prices can show the best trading opportunities.
Trading rules for Elder – Ray:
1)The trend is up.
2)Bear power is rising but negative.
3)Latest peak of bull power is higher than the previous peak.
4)Bear power is rising from a bullish divergence.
Sell decisions are opposite of buying decisions.
Force Index is an oscillator which measures the force of bulls behind every rise and vice-versa. Force Index is developed by Dr Elder himself.
Trading rules for Force Index:
- When a 2-day EMA of the force index turns negative during uptrends, buy.
- Short when a 2-day EMA of force index turns positive in down trends.
- Bullish divergences between a 2-day EMA of force index and price gives buy signals.
- Bearish divergences between a 2-day EMA of force index and price give sell signals.
- When a 13-day EMA of force index is above its centerline, it signifies a bullish control and vice – versa.
- A new day in the 13-day EMA of force index signifies that a rally is about to continue.
- A new low in the 13-day EMA of force index signifies that a downtrend is likely to continue.