Elder-Ray Index

DEFINITION of 'Elder-Ray Index'

A technical indicator developed by Alexander Elder that measures the amount of buying and selling pressure in the market. This indicator consists of two separate indicators known as "bull power" and "bear power". These figures allow a trader to determine the position of the price relative to a certain exponential moving average (EMA).

Bull Power = Daily High - n-period EMA
Bear Power = Daily Low - n-period EMA

BREAKING DOWN 'Elder-Ray Index'

Technical traders will use the values of the bull and bear power along with divergence to make transaction decisions. Long positions are taken when the bear power has a value below zero but is increasing and the bull power's latest peak is higher than it was previously. A short position is taken when the bull-power value is positive but falling and the bear power's recent low is lower than any other previous bottom. The slope of the EMA can also be used in both cases to help confirm the direction of the trend.

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RELATED FAQS
  1. What is a common strategy traders implement when using the Elder-Ray Index?

    Read about the important buying and selling conditions that are recommended by Dr. Alexander Elder when using his Elder-Ray ... Read Answer >>
  2. Why is the Elder-Ray Index important for traders and analysts?

    Learn about the Elder-Ray index, a novel technical oscillator created by Dr. Alexander Elder to assess the buying and selling ... Read Answer >>
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