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.

RELATED TERMS
  1. Exponential Moving Average - EMA

    A type of moving average that is similar to a simple moving average, ...
  2. Purchasing Power Loss/Gain

    An increase or decrease in how much consumers can buy with a ...
  3. Earnings Power

    A business's ability to generate profit from conducting its operations. ...
  4. True Strength Index - TSI

    A technical momentum indicator that helps traders determine overbought ...
  5. Separation Of Powers

    An organizational structure in which responsibilities, authorities, ...
  6. Buying Power

    The money an investor has available to buy securities. In a margin ...
Related Articles
  1. Trading

    The Elder-Ray Indicator: Seeing Into The Market

    Elder-ray helps determine the strength of competing groups of bulls and bears so you know when to buy and when to short.
  2. Trading

    Triple Screen Trading System - Part 4

    How can a trader use the Elder-Ray oscillator as the second screen of this system? Find out here.
  3. Trading

    This Indicator Should Always Be Part Of Your Strategy

    The relationship between price, 200-day EMA and its slope of generate useful patterns that assist in price prediction and trade management.
  4. Trading

    Discovering The Force Index

    Learn how to measure the power of bulls behind rallies and bears behind declines.
  5. Markets

    What Is Purchasing Power?

    Purchasing power expresses money’s value by defining the amount of goods or services it can buy.
  6. Trading

    Using The Force Index For Short- and Medium-Term Trading

    Here are the guidelines for making trading decisions using the force index in both a short and intermediate perspective.
  7. Trading

    Simple Vs. Exponential Moving Averages

    These technical indicators help investors to visualize trends by smoothing out price movements.
  8. Trading

    Triple Screen Trading System - Part 6

    Williams %R can confirm the strength of trends and warn of reversals. Find out how to use it as the second screen in this triple-screen system.
  9. Trading

    Moving Averages: What Are They?

    By Casey Murphy, Senior Analyst ChartAdvisor.com Among the most popular technical indicators, moving averages are used to gauge the direction of the current trend. Every type of moving average ...
  10. Markets

    Power Corporation's Hidden Value North Of The Border

    Power Corporation one diversified financial services holding company in Canada that may be worth a lot more than it appears.
RELATED FAQS
  1. How do I use Elder-Ray Index for creating a forex trading strategy?

    Utilize the Elder-Ray index to create a forex trading strategy that can be used at potential market turning points where ... Read Answer >>
  2. What are the best technical indicators to complement the Exponential Moving Average ...

    Utilize additional technical indicators to complement and improve a basic trading strategy that relies on exponential moving ... Read Answer >>
  3. How do I use Exponential Moving Average (EMA) to create a forex trading strategy?

    Use the exponential moving average (EMA) to create a dynamic forex trading strategy. Learn how EMAs can be utilized very ... Read Answer >>
  4. What are the main differences between Moving Average Convergence Divergence (MACD) ...

    Understand the exponential moving average, or EMA, and the moving average convergence divergence, or MACD, and their respective ... Read Answer >>
  5. What are the main disadvantages of using the Exponential Moving Average (EMA)?

    Discover the primary differences between exponential and simple moving average indicators, and what disadvantages EMAs can ... Read Answer >>
  6. What is a common strategy traders implement when using the Exponential Moving Average ...

    Learn a common strategy traders use in conjunction with the Exponential Moving Average indicator known as the moving average ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center