Elder Ray Index
Oscillator indicators are used on the second screen is Elder Ray Index, or abbreviated Elder Ray alone. This indicator was made by Dr. Elder is based on the concept of strength of bullish and bearish in the market. Bullish strength measures the ability of the market to drive the price well above the current average, while the bearish strength measures the ability of the market to push prices lower than the average price now.
By using the trend following indicators such as MACD on the weekly long term time frame, then the trader can identify the direction of the long-term trend. Elder Ray indicator is used to determine the momentum of entry. If the price action on the weekly time frame is bullish or uptrend, then the trader should buy signal on the concentration of the 5-day time frame (according to the norm of a triple screen), and the contrary to the movement of the market is bearish or downtrend.
Elder Ray indicator can be obtained from the Metatrader platform by going to Insert-Indicators-Oscillators-Bulls Power and Bears Power. The default period used 13. Here is an example of Elder Ray on EUR / USD daily time frame:
Buy and sell signals
With Elder Ray indicator, the momentum to buy the most appropriate is when a price movement on long-term time frame is uptrend and Bears Power is in the area of negative (below the zero line) but the direction is moving upwards or towards the zero line. If the weekly time frame is bullish, then traders should concentrate on Elder Ray indicator intermediate time frame (5-day), with the Bears Power on the negative area which is moving upwards.
Avoid to open long positions when the Bears Power is in the area above the line is positive or zero. Just as when we use Force Index indicator, long positions should be opened above the highest level on the day of, in this case can be used stop orders (to buy stop). Being able to set the stop loss level at the lowest level that day or the previous day, whichever is lower.
Level can be determined manually exit when the Bears Power is in the positive area and strengthened, and the Bulls Power is in the area of negative or positive area but are weakened. For a sell signal otherwise valid, the entry when the time frame weekly downtrend (bearish) and the Bulls Power is in the negative area, but its direction is moving upwards.
Entry signals can be more accurate if it occurs at the same time or a divergence between the Bulls Power Bears Power with price movements. Bullish divergence occurs when the Bears Power form the bottom levels are higher priced but failed to form a low level that is lower than before. Instead bearish divergence occurs when the Bulls Power shaping bottom levels are higher priced but failed to form a high level higher than before.
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