It was a choppy ASX session in mid-2022 — the kind where price kept nudging above a 13-period EMA, then collapsing back. Bull Power read +4.2, Bear Power sat at -1.8. That combination — positive Bull Power shrinking while Bear Power deepened — told traders the buyers were running out of steam before price confirmed it. The Elder Ray caught it cleanly.

Alexander Elder built this index around one core idea: an exponential moving average represents market consensus, and the distance price travels above or below that EMA reveals the true strength of bulls and bears. Bull Power is simply the period high minus the 13-period EMA. Bear Power is the period low minus the same EMA. Both values update every single bar, giving you two separate force readings rather than one blended oscillator.

CONCEPTBull Power = Period High minus 13-EMA; Bear Power = Period Low minus 13-EMA — two distinct readings, not one.
WARNINGNever trade Elder Ray signals in isolation — Elder himself insisted on a trend filter running alongside it.
KEY IDEADivergence between price and Bull or Bear Power is where the index earns its keep — not crossovers.

The standard settings are a 13-period EMA with Bull Power and Bear Power plotted as histograms beneath price. Elder's own trading system pairs it with a longer-term trend indicator — commonly a 26-period EMA on a weekly chart — to establish direction first. You only look for long setups when the trend is up, meaning Bear Power is negative but rising toward zero. Short setups favour a downtrend with Bull Power positive but falling. The index is not a standalone crystal ball; it is a confirmation layer.

Elder Ray Index — IllustrativeEMABull+Bear-Time →

The classic divergence signal works like this: price makes a new high but Bull Power's histogram peak is lower than the previous peak. That gap flags weakening buying pressure before price rolls over. On the bear side, price makes a new low but Bear Power's trough is less negative than before — buyers are absorbing more of each sell-off. Neither signal guarantees anything; divergences can persist far longer than feels reasonable. For deeper context on how Elder designed the broader system, the Investopedia Elder Ray entry covers the mechanics thoroughly, the Wikipedia Elder Ray Index page traces its origins, and the exponential moving average explainer clarifies why EMA rather than SMA underpins the calculation.

The Elder Ray Index rewards traders who treat it as a pressure gauge, not a trigger. Read the divergences, respect the trend filter, and remember the histogram is measuring force — not predicting the future.

Two readings on a histogram do not make a trading system — but they do tell you who is actually winning the fight.

This content is for educational purposes only and does not constitute financial product advice. Past performance is not indicative of future results. Profit Logic Ltd (ACN 688 669 936) accepts no responsibility for errors or omissions in this content or anywhere on this website. Always seek advice from a licensed financial adviser before making investment decisions.