Bulls Power and Bears Power



Indicators Bulls Power and Bears Power

Each trading day in Forex is a struggle of buyers (Bulls) and sellers (Bears). Bulls are interested in price

growth, Bears — in price decrease. The result of ending of the day depends on who has stronger

positions: buyers or sellers. But intraday fluctuations, the highest and lowest price in the day also show

how strong positions have members of the market.


The main idea

The assessment of the balance of Bulls and Bears forces has the great influence. Prerequisites of changes

in this balance are one of the first signals that can lead to changing trends. Bulls Power and Bears Power

were invented by Alexander Elder (the famous trader and financier). These indicators are perfect to use

with one of the trend indicators.

Bulls Power and Bears Power are based on 13th Exponential Moving average and maximum or minimum

price.


Bulls Power: definition and formula

Bulls Power is the difference between the highest price and 13 - period exponential moving average.

Accordingly, it is calculated using the formula:

BULLS = HIGH - EMA

Where:

BULLS - Bulls Power;

HIGH - the highest price;

EMA - Exponential Moving Average.

When there is a rising trend in the market, the indicator is bigger than zero. When there is a decreasing

trend, Bulls Power indicator is less than zero.


Bears Power: definition and formula

Bears Power indicator is opposite than the Bulls Power indicator. It measures the strength of the bears in

the market. Accordingly, it is calculated as the difference between the minimum value of the price per

day exponential moving average with period 13.

It is calculated using the formula:

BEARS = LOW - EMA

Where:

BEARS - Bears force;

LOW - the lowest price;

EMA - Exponential Moving Average.

Then the downward trend is weak, the indicator Bears Power will be less than zero. If prices rise, it will

also be above the zero line.

As a rule, these two indicators are used in conjunction with trend indicators (moving averages, or other).

In this case the slope of the last shows the direction of prices. This should be taken into account during

the decision-making opening and closing positions.

So, when the strength of the Bulls shows a value greater than zero, but is reduced at the same time, a

moving average also goes down - it is a signal for the sales. In this case, the discrepancy can amplify the

signal peaks (divergence).

Similarly used Bears Power indicator: when the moving average shows the upward trend in prices, and

the indicator is trading below zero, it is a signal to buy. Divergence also strengthens it.


Signals for buy are:

- Rising movement of the moving average

- Growth indicator Bears Power at a value less than zero

- Divergence (divergence of the maximum and minimum values of the indicator and the price chart)

It is not necessary to trade with a downward motion (Bears Power index is less than zero). A good signal

is a long-term decline after a turn-up (below the zero line).


Signals for sale are:

- Decrease movement of the moving average

- Decrease indicator of Bulls Power which locates above zero

- Divergence

When you open a position for sale, to limit losses, you can put a stop-loss at a level above the last

maximum value for money.