The Elder Ray Index trading signal

The Elder Ray Index was developed by the famous trader and
author Dr. Alexander Elder. The two main components are the
Bull Power indicator and the Bear Power indicator. These
indicators show whether it is the bulls or the bears, which
are currently the dominant force in the markets.

These are the advantages of the Elder
Ray Index signal:

• A trading signal created by a famous trader.
• The quality of the signal, with the fourth condition
  activated, appears strong.
• The signal can be used in any time frame.
• The signal can be used on any instrument.
• The trading signal is FREE.

The Bull Power and Bear Power indicators are shown below the
main chart. The Bull Power is calculated by subtracting that
day’s exponential average (EMA) from the day’s high. If the
daily high is above the EMA, then the Bull Power is positive
and the histogram is above the zero line. The Bear Power is
calculated by subtracting that day’s EMA from the day’s low.
If the daily low is below the EMA, then the Bear Power is
negative and the histogram is below the zero

This example shows Dr. Alexander Elder’s Bull Power
indicator (green) and Bear Power indicator (red). These
indicators would be shown below the main chart.

When to open a position?

For a buy signal the following conditions must be
met:

1. The market price (EMA) is going up.
2. The Bear Power is negative (below zero), but going up.
3. The current Bull Power bar is higher than the previous
   bar.

For a short sell signal the following conditions
must be met:

1. The market price (EMA) is going up.
2. The Bull Power is positive (above zero), but going down.
3. The current Bear Power bar is lower than the previous bar.

For traders, who want a strong confirmation for the trading
signal, Dr. Alexander elder added an optional fourth
condition. The fourth condition reduces the number of trading
signals but increases the quality of the signals.

For the buy signal:

4. The Bear Power indicator shows a bullish divergence with
the market price. This means the indicator goes up and the
price down.

For the short sell signal:

4. The Bull Power shows a bearish divergence with the market
price. This means the indicator goes down and the market price
goes up

This example shows a chart with several buy signals
(green) and short sell signals (red) generated by the Elder
Ray Index. This trader uses the optional fourth condition. The
condition is set to seven periods. There are some very nice
trading signals.

This is the same example as above. The fourth
condition postulated by Dr. Alexander Elder is not activated.
More trading signals are given, but the quality of the signals
is clearly inferior. It is therefore highly recommended to
activate the fourth condition.