Elder-Ray Index

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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. Why is the Elder-Ray Index important for traders and analysts?

    Dr. Alexander Elder created the Elder-Ray index as a way to assess the current buying and selling influences in the market. ... Read Full Answer >>
  2. How do I use Elder-Ray Index for creating a forex trading strategy?

    The Elder-Ray index can be used to create a forex trading strategy for critical market turning points where a market reversal ... Read Full Answer >>
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    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
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  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>

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