Deciding whether to buy or sell is crucial in the trading business. To make this decision more accurate the traders use the help of analysis tools. Technical indicators may produce signals on which base the traders may enter or exit positions. Today we will talk about the indicator known as the Elder Ray Index. Let’s see how to utilise it on the Olymp Trade platform.
Key Takeaways🔑
| →The Elder Ray Index is a comprehensive indicator for gauging buying and selling pressure in the market. |
| →This index includes two indicators, the Bears Power and the Bulls Power, that provide important market insights. |
| →Employing the Elder Ray Index in combination with other indicators like the Exponential Moving Average (EMA) can increase trading effectiveness. |
Contents
In the search of the Elder Ray Index
Dr Alexander Elder was the father of the Elder Ray Index. It is supposed to scan the market as an x-ray device, thus the name. It follows the trend and its main objective is to gauge the buying and selling forces in the market.
There are two indicators that form the Elder Ray Index, the Bears and the Bulls Power. And you have to look for them in order to utilise the Elder’s indicator on the Olymp Trade platform.
The Bears and the Bulls Power indicators
Once you are logged in to your trading Olymp Trade account you must decide what instrument and on what type of chart you are going to use in this session. Then, you go to the indicators icon, click on it and search for the indicators you need. In our case, you will have to attach two indicators to the chart. The first one will be the Bears Power indicator, and the second the Bulls Power.
The default colour of the Bears Power is red and period 13. For the Bulls Power, the colour is green and the period is likewise 13. They appear in the separate windows beneath the price chart.
Both indicators are in the form of a histogram. The bars appear around the middle 0 line.
Trading with the Bears and the Bulls Power indicators on Olymp Trade
The Elder Ray Index is frequently supported by additional indicators. The most common in this case is the Exponential Moving Average with the period set at 13. The EMA will confirm the trend direction.
Going long with the Elder Ray Index
The first thing to check, when you plan to open a long position, is whether there is an uptrend in the market. To do that, look at the EMA13 line. It should be rising. The next thing is to check the Bears Power window. The bars should lie in the negative zone and rise which indicates their strength weakens. Lastly, look at the Bulls Power indicator. It is rising which, in turn, means the bulls are accumulating strength.
Going short with the Elder Ray Index
When is a good time to enter a down trade with the Elder Ray Index? First, confirm the downtrend by watching the EMA13 falling. Then, notice how the Bears Power indicator is diminishing (the bears are becoming more powerful). And lastly, the Bulls Power is in the positive area and lowering which shows the bulls’ force lowers.
Pros and Cons of the Elder Ray Index 📊
Pros:
- Provides comprehensive market insights. 📈
- Can be used alongside other indicators for enhanced trading strategy. 🤝
- Applicable across various market conditions. 🌦️
Cons:
- May produce signals with some delay due to its reliance on moving averages. ⏱️
- Requires careful interpretation to avoid misreads. 🧐
- Potential for false signals, particularly in volatile markets. 🔀
Elder Ray Index Indicators and Their Role 🧠
| Indicator | Role |
|---|---|
| Bears Power | Measures selling pressure in the market. When Bears Power is rising, it signifies increasing selling pressure. |
| Bulls Power | Gauges buying pressure in the market. When Bulls Power is increasing, it signifies mounting buying pressure. |
Conclusion
The Elder Ray Index is a quite useful tool. It gauges the buying and selling pressure and is built with two indicators available on the Olymp Trade platform, the Bears and the Bulls Power. When applied together with the Exponential Moving Average may provide trading signals for your transactions.
A long trade can be opened when the EMA confirms the uptrend and when both indicators are rising. A short trade should be considered when there is a downtrend confirmed by a falling EMA and the Bears and the Bulls Power indicators are decreasing.
You may wish to test diverse settings of the indicators. Bear in mind they use moving averages in their calculations and thus may produce signals with some portion of delay. Employ another analysis method to validate your decisions about opening and closing positions.
As always, I recommend you check the new indicator out in the demo Olymp Trade account. This way you can practice with no fear you will lose your money.
Have a great trading performance!
Frequently Asked Questions (FAQs) about the Elder Ray Index ❓
- Q: How does the Elder Ray Index indicate market trends?
A: The Elder Ray Index uses two indicators – Bulls Power and Bears Power – to gauge buying and selling pressure, respectively. This helps identify market trends. - Q: Can the Elder Ray Index be used alone for trading decisions?
A: While it’s possible, it’s recommended to use the Elder Ray Index in combination with other indicators, such as the Exponential Moving Average (EMA), for more accurate trading decisions. - Q: What does it mean when the Bears Power is rising?
A: A rising Bears Power indicates increasing selling pressure in the market. - Q: How does the Bulls Power indicator work?
A: The Bulls Power indicator measures buying pressure in the market. An increase in Bulls Power signifies mounting buying pressure. - Q: Can the Elder Ray Index be used in any market condition?
A: Yes, the Elder Ray Index is versatile and can be employed across various market conditions. However, it may provide delayed signals in certain situations due to its reliance on moving averages.