Elder ray indicator was invented by Dr. A. Elder. This indicator measures the amount of buying and selling pressure in the market. It consists of two separate charts: Bears Power Chart and Bulls Power Chart.
Bears Power chart shows sellers ability to lower the price below intrinsic value (below EMA), Bull Power Chart on the other hand shows buyers ability to higher the price above intrinsic value. Elder ray indicator is often used as a part of Elder’s “Triple screen” system, but it also can be used as a separate indicator.
Bears Power and Bulls Power charts are calculated according to the below formula:
Bears Power = Low – EMA(13)
Bulls Power = High – EMA(13)
High – maximum price in a given period
Low – minimum price in a given period
Trade with this indicator should progress only in the direction indicated by the direction of moving average.