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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.

Bull Power and Bear Power indicators by Dr Alexander Elder.
 
 

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.

Dr Alexander Elder 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.

Dr Alexander Elder trading signals.

Practical implementation

Open the chart of the instrument you wish to trade.

In the WHS Signals folder, select the Elder Ray Index.

Set the fourth condition for a trading signal. If you do not want a fourth condition, select 0.

To trade semi-automatically, activate TradeGuard+AutoOrder in the chart. To trade automatically, activate AutoOrder in the chart.