Understanding market momentum is essential for making informed trading decisions. Among the many tools available, the Bull and Bear Power indicators stand out as effective oscillators that reveal the strength behind price movements. Developed by Dr. Alexander Elder as part of the Elder-Ray Index, these indicators help traders assess whether bulls (buyers) or bears (sellers) are in control—offering valuable insights into potential entry and exit points.
This guide provides a comprehensive breakdown of how to use Bull and Bear Power indicators in MetaTrader 4 (MT4) and MetaTrader 5 (MT5), including calculation methods, practical application, and integration with trend analysis for optimal results.
What Is the Elder-Ray Index?
The Elder-Ray Index is a unique technical analysis tool that separates bullish and bearish market forces into two distinct indicators: Bull Power and Bear Power. Unlike single-oscillator tools like the Relative Strength Index (RSI) or Force Index, Elder’s approach uses dual measurements to provide a clearer picture of market sentiment.
Dr. Alexander Elder named the index by combining his surname with “X-ray,” symbolizing the indicator’s ability to "see beneath the surface" of price action. The core idea is simple:
- Bull Power measures how strongly buyers can push prices above a baseline value.
- Bear Power evaluates how aggressively sellers can pull prices below that same baseline.
This baseline is typically a 13-period Exponential Moving Average (EMA) of closing prices—a dynamic reference point representing the market’s consensus of value over time.
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Elder emphasized that markets involve three types of participants: buyers, sellers, and undecided traders. A trade occurs when a buyer and seller reach a momentary agreement on price—this is the "consensus of value." As more traders commit to buying or selling, this consensus shifts, reflected in price trends and oscillator behavior.
By combining the trend-following EMA with momentum-based oscillators, the Elder-Ray system blends directional bias with strength assessment—allowing traders to align trades with dominant market forces.
How Are Bull and Bear Power Calculated?
The calculation behind these indicators is straightforward yet insightful:
- Bull Power = High Price – 13-period EMA
- Bear Power = Low Price – 13-period EMA
Here's what each tells us:
- When Bull Power is positive, it means the high price exceeded the EMA, indicating strong buying pressure.
- When Bull Power turns negative, even briefly, it suggests bulls are losing control.
- When Bear Power is negative, sellers are pushing prices below the EMA—typical during downtrends.
- When Bear Power becomes positive, it signals weakening bearish momentum, possibly foreshadowing a reversal.
These values are displayed as histograms below the main price chart, making visual interpretation intuitive. Traders watch for crossovers above or below the zero line, divergence patterns, and convergence with trend direction.
Setting Up Bull and Bear Power in MetaTrader 4
In MetaTrader 4, both indicators are located under the "Oscillators" section in the Navigator panel. You can apply them individually, but for full effectiveness, follow Elder’s original design:
- Apply a 13-period EMA to the price chart.
- Add the Bull Power indicator.
- Add the Bear Power indicator.
Once applied, you’ll see:
- The green dotted EMA line on the price chart (commonly used color).
- Two separate histogram windows below: one for Bull Power (typically blue), one for Bear Power (often red).
This setup allows you to:
- Confirm trend direction via EMA slope.
- Analyze momentum strength using histogram height and position relative to zero.
- Spot divergences between price and oscillator readings.
For example, on an hourly GBP/USD chart, consistent positive Bull Power readings above zero during an uptrend confirm sustained buying interest. Conversely, deep negative Bear Power spikes suggest aggressive selling during downtrends.
Trading Strategies Using Bull and Bear Power
To trade effectively with this system, follow Elder’s structured rules combining trend confirmation and oscillator signals.
Rules for Long (Buy) Entries:
- Trend Condition: The 13-period EMA must be sloping upward (uptrend).
- Mandatory Signal: Bear Power is below zero but rising—indicating declining selling pressure.
Optional Confirmation:
- Recent Bull Power peak exceeds the previous high (increasing bullish strength).
- Bullish divergence: Price makes a lower low, but Bear Power forms a higher low—signaling weakening bears.
Exit when price reaches a new high but Bull Power fails to surpass its prior peak—this warns of fading momentum.
Rules for Short (Sell) Entries:
- Trend Condition: The EMA slopes downward (downtrend).
- Mandatory Signal: Bull Power is positive but decreasing—showing weakening buying pressure.
Optional Confirmation:
- Latest Bear Power low is lower than the last (stronger bearish momentum).
- Bearish divergence: Price hits a higher high, but Bull Power records a lower peak—suggesting exhaustion among buyers.
This pattern often precedes reversals or continuation breaks after consolidation.
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Enhancing Analysis With Multi-Timeframe and Multi-Indicator Approaches
While powerful alone, Bull and Bear Power work best when combined with broader analysis techniques:
- Multi-Timeframe Confirmation: Before trading on an hourly chart, review the 4-hour or daily trend. Trading in alignment with higher-timeframe momentum increases success probability.
- Additional Indicators: Consider pairing with RSI or MACD for confluence. For instance, if Bear Power shows rising momentum in a downtrend and RSI exits overbought territory, it strengthens a short signal.
- Use MetaTrader Supreme Edition: This free plugin expands MT4/MT5 capabilities with enhanced indicators and widgets, giving you deeper insight into market dynamics.
As Alexander Elder noted, no single indicator captures everything. Markets are complex systems where signals may conflict—hence the importance of filtering with trend-following tools first, then refining entries with oscillators.
Frequently Asked Questions (FAQ)
Q: Can Bull and Bear Power be used in ranging markets?
A: They are less effective in sideways markets due to frequent false signals. Best used in clear trending conditions confirmed by EMA direction.
Q: What timeframes work best with these indicators?
A: They perform well across multiple timeframes—from 15-minute charts for day trading to daily charts for swing trading—but always confirm with higher-timeframe trends.
Q: Is the 13-period EMA fixed, or can I adjust it?
A: While 13 is standard per Elder’s methodology, some traders modify it based on volatility or asset class. However, consistency helps maintain signal reliability.
Q: How do I spot divergence using Bear Power?
A: Look for situations where price makes a new low but Bear Power histogram prints a shallower bottom—this indicates diminishing selling pressure and potential reversal.
Q: Should I rely solely on Bull and Bear Power for trading decisions?
A: No. Always combine with trend analysis, risk management, and ideally, confirmation from other indicators or price action patterns.
Q: Can I automate strategies using these indicators?
A: Yes. In MT4/MT5, you can create Expert Advisors (EAs) that trigger trades based on Bull/Bear Power crossovers or divergence conditions.
Final Thoughts on Using Bull and Bear Power Indicators
The Bull and Bear Power indicators offer traders a clear window into market psychology—revealing who’s in control and when momentum may be shifting. When used alongside a 13-period EMA as part of the Elder-Ray system, they form a robust framework for identifying high-probability trades in trending markets.
Key takeaways:
- Use EMA slope to determine trend direction.
- Rely on Bull/Bear Power histograms to gauge momentum strength.
- Watch for divergences and zero-line crossovers for early reversal clues.
- Combine with multi-timeframe analysis and additional tools for greater accuracy.
Whether you're analyzing forex pairs like GBP/USD or other financial instruments, mastering these indicators enhances your ability to enter trades with confidence—and exit before momentum fades.
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