Momentum · Indicator
Elder Ray splits each bar into Bull Power and Bear Power, measuring how far the high and low reach beyond an exponential moving average.
Overview
The Elder Ray Index was developed by Dr Alexander Elder. Bull Power is the high minus an exponential moving average and Bear Power is the low minus the same average. Together they measure the strength of buyers and sellers relative to the exponential moving average, which Elder described as the consensus value that the market has agreed on over the averaging period.
The reasoning is straightforward. The EMA represents the average agreed price; the high of the bar shows the furthest point buyers could push above that consensus, and the low shows the furthest point sellers could push below it. Bull Power is therefore a measure of how much buying force was present during the bar, and Bear Power a measure of selling force, both expressed in price units relative to a common reference.
Elder designed the indicator as one component of a three-part system, alongside a longer-timeframe trend filter and money management rules. The two histograms are meant to time entries in the direction the trend filter has already established, not to decide direction on their own, which is the context most often lost when the indicator is used in isolation.
How it is calculated
An exponential moving average of the close is computed over the chosen length. For each bar, Bull Power is the bar's high minus that average and Bear Power is the bar's low minus the same average, so both are quoted in the instrument's price units.
In a normal uptrend Bull Power is positive and Bear Power is negative, since the high sits above the average and the low below it. Bear Power turning positive means even the bar's low was above the average, which describes a strong advance; Bull Power turning negative means even the high was below the average.
EMA = EMA(close, Length) Bull Power = high - EMA Bear Power = low - EMA
Inputs
How to read it
Read the two histograms together and against zero. The normal condition is Bull Power positive and Bear Power negative, with the bar straddling the average. The size of each tells you how far each side managed to push, so a large Bull Power with a small negative Bear Power describes a bar where buyers dominated throughout.
The unusual states carry the most information. Bear Power above zero means sellers could not push price below the consensus value at any point in the bar, which happens in strong advances. Bull Power below zero means buyers could not lift price above the average at all, which happens in strong declines. Both are signs of one-sided control.
Elder's own emphasis was on the direction of change rather than the level. Bear Power becoming less negative during a downtrend means sellers are gradually losing their ability to push price below consensus, which he treated as the setup for a long entry once the higher-timeframe trend agreed.
Signals to look for
In an uptrend established on a higher timeframe, a negative Bear Power that has been rising for consecutive bars indicates sellers are weakening. Elder used this as the entry trigger rather than the trend signal.
The mirror condition in a downtrend: a positive Bull Power that shrinks over consecutive bars indicates buyers are losing their ability to push above the consensus value.
Bear Power turning positive, or Bull Power turning negative, marks a bar that traded entirely on one side of the moving average, which is read as strong one-directional control.
Price making a new high while Bull Power peaks lower says buyers pushed less far beyond the consensus value than on the previous advance, which describes a weakening impulse.
Limitations
Frequently asked questions
Elder Ray splits each bar into Bull Power and Bear Power, measuring how far the high and low reach beyond an exponential moving average.
Read the two histograms together and against zero. The normal condition is Bull Power positive and Bear Power negative, with the bar straddling the average. The size of each tells you how far each side managed to push, so a large Bull Power with a small negative Bear Power describes a bar where buyers dominated throughout.
Bear Power rising while below zero: In an uptrend established on a higher timeframe, a negative Bear Power that has been rising for consecutive bars indicates sellers are weakening. Elder used this as the entry trigger rather than the trend signal.
Both values are quoted in the instrument's price units, so readings are not comparable between instruments and their typical range changes as the price level changes.
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