For oscillators that can generate buy and sell signals, consider adding Bulls Power and Bears Power indicators to your Forex charts.
While these are two different indicators, they work the same way, and usually are used in tandem.
These indicators are the work of Alexander Elder, and are described quite well by their names. The Bulls Power indicator is telling you how strong the bulls are (the buyers). The Bears Power indicator is telling you how strong the bears are (the sellers).
Sometimes, they are also referred to as "Elder Ray indicators." Elder himself apparently coined this name, and was inspired by the idea of a "X-ray" for the markets.
Key point: You can visualize the strength of buyers and sellers in the market by plotting the Bull and Bear Power indicators.
The calculations for the Bulls Power indicator and the Bears Power indicator are pretty straightforward.
While one might hypothetically use any exponential moving average, most commonly, one uses the 13-day EMA, as suggested by Elder when he came up with these indicators.
As always, you do not need to concern yourself with running these calculations manually since your trading platform will take care of it for you.
Key point: The Bulls Power indicator and Bears Power indicator are both calculated using a simple formula comparing the EMA with the high or low respectively.
What we are looking at with the Bulls Power and Bears Power indicators is the distance between the EMA and the high/low. This corresponds with the influence of the bulls/bears to continue to push price past the EMA.
You will notice on your charts that the Bulls and Bears Power indicators can both display negative or positive values.
Note that positive values in the Bulls Power indicator indicate bullish strength, while negative values in the Bears Power indicator indicate bearish strength.
Key point: Bulls and Bears Power indicators help us visualize the strength of buyers and sellers respectively.
Here are the steps to plot the Bulls Power indicator and Bears Power indicator on your MT4 Forex charts.
That's all there is to it. You are now ready to look for setups using the Bulls Power indicator and the Bears Power indicator.
Key point: You can add the bulls and Bears Power indicators to your charts in MT4 in a few quick steps.
Elder not only created this set of indicators, but he also proposed a method for trading with them. Here are his rules for buying and selling.
While those are the only two required conditions, the following conditions suggest an even more ideal setup:
These optional criteria make for an even better setup:
Key point: Elder's method for trading using the bulls and Bears Power indicators requires that you plot the EMA on your chart and that you meet two required criteria for entry. There are two optional criteria as well for even stronger setups.
Key point: However you choose to use the bulls and Bears Power indicators in your trading, always check if you are profitable in demo before going live.
Now you know how you can use the Bulls Power indicator, Bears Power indicator, and 13-day EMA together to generate buy and sell setups for Forex trading. While Elder's method may seem complex at first, it is relatively straightforward once you see it in action.
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