Elder Ray explained

Volatility

What Elder Ray measures

Elder Ray, developed by Alexander Elder, splits each bar's price action into two separate measures: Bull Power (the high minus an EMA, showing how far buyers pushed price above the average) and Bear Power (the low minus the same EMA, showing how far sellers pushed price below the average). Looking at buying and selling pressure as two distinct forces, rather than one combined oscillator, is the whole point.

How Elder Ray readings are interpreted

Rising Bull Power alongside a rising EMA confirms strong buyer conviction in an uptrend. Bear Power that stays negative but is becoming less negative (rising toward zero) during an uptrend often signals the pullbacks are getting shallower — a bullish sign. The same logic applies in reverse for downtrends.

Conventional Elder Ray levels

Bull Power positive and rising: strong buying pressure, healthy uptrend
Bear Power negative but rising toward zero during an uptrend: sellers losing conviction, bullish continuation signal
Bear Power making a new low while price makes a higher low: bearish divergence, a warning sign inside an apparent uptrend
Both Bull and Bear Power weakening simultaneously: trend losing momentum on both sides

Where Elder Ray works, and where it does not

Most useful in trending markets for gauging trend health and spotting early divergence warnings — in flat, range-bound markets both Bull and Bear Power tend to stay small and close to zero, offering less useful signal.

Indicators commonly read alongside Elder Ray

Moving Averages: Elder Ray is built directly on top of an EMA, so pair naturally with EMA trend direction for context
MACD: Elder's own trading system pairs Elder Ray with MACD for combined trend and pressure confirmation
Balance of Power: A conceptually similar tool from the same toolkit — agreement between the two adds confidence

Known limitations of Elder Ray

Reading the divergence between price highs/lows and Bear/Bull Power highs/lows requires more chart-reading nuance than a simple threshold cross
Less standardized thresholds than more common oscillators — interpretation leans more discretionary
Two separate lines (Bull and Bear Power) rather than one combined number makes it slightly less convenient for simple screening

Elder Ray in practice

Watch specifically for Bear Power divergence during an uptrend (or Bull Power divergence during a downtrend) as an early warning signal
Use alongside the underlying EMA to judge overall trend direction before interpreting Bull/Bear Power readings
Works well as part of Elder's broader "Triple Screen" trading system alongside a longer-term trend filter and a shorter-term entry oscillator
Best suited to swing traders actively managing trend-following positions who want an early pullback-strength read

Other volatility indicators

Mass Index
Ulcer Index
ATR — Average True Range
Bollinger Bands

Testing ideas built on Elder Ray

A reading of Elder Ray can be written as an exact rule and checked against historical data — as a full strategy with entries, exits and costs, or as a single condition and what followed it:

How to backtest a trading strategy without code
Event analysis: what follows a market event

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.