Elder-Ray Index

AAA

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

INVESTOPEDIA EXPLAINS '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. Indicator

    Statistics used to measure current conditions as well as to forecast ...
  2. Bear

    An investor who believes that a particular security or market ...
  3. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  4. Bottom

    The lowest point or price reached by a financial security, commodity, ...
  5. Bull

    An investor who thinks the market, a specific security or an ...
  6. Divergence

    When the price of an asset and an indicator, index or other related ...
Related Articles
  1. Trading Strategies

    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 power in a market.
  2. Forex Strategies

    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 a trend reversal may occur.
  3. Active 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.
  4. Technical Indicators

    Why is the 200 Simple Moving Average (SMA) so common for traders and analysts?

    Learn about the 200 simple moving average (SMA), how it is utilized by traders and analysts, and why it is considered to represent major support or resistance.
  5. Trading Strategies

    How do I build a profitable strategy when spotting a Three White Soldiers pattern?

    Learn a simple trading strategy implemented based on the bullish market reversal signal given by the three white soldiers candlestick pattern.
  6. Trading Strategies

    How are Three Black Crows patterns interpreted by analysts and traders?

    Understand the basics of the three black crows pattern and how analysts and traders interpret this bearish reversal pattern when creating a trading strategy.
  7. Trading Strategies

    How effective is creating trade entries after spotting a Symmetrical Triangle pattern?

    Understand the symmetrical triangle pattern and the likely success of the most common breakout trading strategy implemented when the pattern is identified.
  8. Forex Strategies

    How do I implement a forex strategy when spotting a Rounding Bottom Pattern?

    Understand the key factors to implementing a profitable forex trading strategy based on recognizing the formation of a rounding bottom pattern.
  9. Trading Strategies

    How are Stick Sandwich patterns interpreted by analysts and traders?

    Understand the basics of the stick sandwich candlestick pattern and how this reversal signal is interpreted by analysts and traders.
  10. Trading Strategies

    How effective is creating trade entries after spotting a Three Black Crows pattern?

    Understand the basics of the three black crows candlestick pattern and how this reversal signal is used for the creation of effective trade strategy.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center