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
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
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
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
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.
The indicator is showing relative actual strength of currency XXX. The indicator calculates its value of close prices of 7 pairs containing currency XXX. The indicator can be used for MEAN REVERSION based strategies. Lets assume XXX YYY currency pair scheme where XXX is BASE currency and YYY is QUOTEcurrency. Place Power of XXX into your chart first and Power of YYY second. You can have 2 relevant situations. 1. Indicators curves are close to each other. It means there is higher probability that the price of the pair XXX YYY will go UP.Do not take Power of .. signals separately from overall market situation (SR levels/zones and so on). 2. Indicators curves are FAR from each other. It means there is higher probability that the price of the pair XXX YYY will go DOWN.Do not take Power of .. signals separately from overall market situation (SR levels/zones and so on).
Elliott Wave Theory is a popular method of analysis that applies a technical approach with a fundamental analysis interpretation. Elliott Wave Theorists also concentrate on the price action strictly, and agree to the notion that the price is the beginning and end of all analysis, but they recognise that there exists an important relationship between liquidity, credit, and economic robustness which underlies the existing price patterns in the market. The Wave Theory was first proposed by Ralph Nelson Elliott, an accountant, in the 1930s. Elliott’s approach was condensed into its definitive form in his 1938 book “Nature’s Laws – The Secret of the Universe” in 1946. Since then, the theory has been regarded both as pseudo-science, and as an effective method for dealing with the uncertainties of the market. Academics tend to disregard it in general, while some famous trading personalities, such as Robert Prechter, and Paul Tudor Jones claim to have attained success by using it. Calculation The Elliott Wave Theory is based on the cyclical nature of market events. Most traders are familiar with the fact that market events, and economical conditions tend to recur in time with a varying frequency. A growth phase may be exceptionally long, or a recession (and a bear market may surprised to be exceptionally harsh and deep, but the nature of trading and economic activity ensures that sooner or later the existing conditions will revert to the opposite, and the market Trading with the Elliott Wave A wave theorist will divide the price pattern into several sub-patterns and consider trade opportunities on the basis of trends that exist at lower levels. Although Elliott Wave Theory is often discussed in the context of decades or years, the fractal nature of the price action enables the application of the theory at any timeframe. Wave theory divides price action into five main phases. At the first phase, the trend is barely obvious as only a small number of traders are aware of its emerging potential. At phase two, there is a small correction, but it never brings prices below the inception point of the trend. Phase three is the strongest and most powerful, and also drives a large number of bystanders into the price action. Phase four is the ensuing corrective phase, and phase five is the final, bubbling phase of the trend where everyone is bullish and massive amounts of capital enter the market. Phase five is followed by a collapse which ends the trend. Deciding where each of these phases begins or ends is mostly a matter of intuition. As such, there are no generally accepted methods, and each trader will sooner or later improvise his own techniques for determining the time frame of a trend. This is not necessarily a problem, since the best way of coping with the resultant failures and losses is choosing a strategy that will accommodate your risk tolerance and mental resilience in trading. Since each person is different, interpretation of Wave Theory also varies from person to person. Conclusion Advantages The main advantage of the Elliott Wave Theory lies in the organisation and compactness that it grants to the chaotic and price action. By reorganising the market patterns into an easily understood hierarchy, the Wave Theory allows greater precision in trade decisions, increasing the trader’s confidence, and widens his horizon by stretching the field beyond the randomness of short-term market events. All these make it possible to formulate more sophisticated and advanced strategies in trading while still keeping the necessities and implications of the immediate market action in mind. Disadvantages The weakness of the Elliott Wave Theory is its arbitrariness. It is rare to have two analysts examine the same chart part pattern and reach the same conclusions or draw the same wave patterns as a result. Indeed, it is almost possible to imagine a complex price pattern on which a large number of analysts will reach consensus. The main reason of this problem is the intuitive, fluid formulation of the theory itself. By attempting to place market dynamics into the strict formalism of a deterministic theory, the analyst deprives himself of the benefit of the insight that prices will and often do move for reasons which do not in any way accept explanation by referencing the past. In other words, it is possible that the market will create recurring patterns that appear to be cyclical without any simplistic underlying causality based on patterns and visual analysis. And when the wave theorists try to disregard this fact and confine the price into an arbitrary structure devised on very strict rules, the outcome is a rainbow pattern of scenarios that have little relationship to actual market dynamics, or the realized future market trends. In summary, we can say that the Wave Theory is useful as a tool for organising one’s opinion about the markets, but it has very little predictive power in the storm of real market action. One could certainly use the theory to generate entry/exit points for trades, but success is only possible if the notion of precision is discarded, and the data is evaluated with strategies suitable to a chance game.
one of good indicator for finding trending pair'si think this indicator must be bollinger+adxespecially use on higher time frameuse defaultgoodluck