BullsPower / BearsPower

Bears Power measures the strength of sellers by comparing the lowest price of a candle to an exponential moving average (EMA). When this indicator is below zero, it suggests that selling pressure is dominant, signaling a potential downtrend or continuation of bearish momentum.

Bulls Power measures the strength of buyers by comparing the highest price of a candle to an EMA. When this indicator is above zero, it suggests that buying pressure is dominant, signaling a potential uptrend or continuation of bullish momentum.

Traders use the Bulls Power / Bears Power indicators to gauge whether buyers or sellers are dominating the market. This can assist in spotting entry and exit points, as well as managing risk when market sentiment shifts.

How Bulls Power / Bears Power Works

Both indicators rely on the relationship between an asset’s price and the Exponential Moving Average (EMA).

• Bulls Power measures how far the highest price of a given period is above the EMA.

• Bears Power measures how far the lowest price of a given period is below the EMA.

If Bulls Power is increasing and remains above zero, buyers are strong. If Bears Power is decreasing and remains below zero, sellers are strong.

Reading the Bulls Power / Bears Power Indicators

• Bulls Power > 0. A positive reading suggests buyers have enough momentum to push the price above the EMA.

• Bears Power < 0. A negative reading indicates sellers are forcing the price below the EMA. Divergences.

• If price is reaching new highs but Bulls Power is not, it may suggest weakening bullish momentum.

• Similarly, if price is making new lows but Bears Power does not confirm, the selling pressure may be weakening.

Using Bulls Power / Bears Power in Trading

1. Identifying Market Sentiment. If Bulls Power is well above zero while Bears Power stays subdued, the market may be bullish. If Bears Power is strong and Bulls Power is weak, the market may be bearish.

2. Confirming Trends. Combine these indicators with a trend indicator like a moving average to confirm the overall direction.

3. Spotting Reversals. Look for divergences to see when a strong trend may lose momentum.

4. Timing Entries and Exits. When Bulls Power or Bears Power signals weaken, consider adjusting your positions or placing stop-loss orders.

Exercise

Objective: Use Bulls Power / Bears Power to assess buying and selling strength before entering trades.

Scenario: Trading Gold (XAU/USD) on a 4-Hour Chart

1. Set Up the Indicator:

   • Open your trading platform, pick the XAU/USD 4-hour chart.

   • Add Bulls Power and Bears Power indicators with default settings.

2. Spot Bullish Strength:

   • Look for Bulls Power to stay above zero and increase.

   • Consider buying opportunities if Bears Power remains below zero and shows no sign of strengthening.

3. Spot Bearish Strength:

   • Observe Bears Power staying below zero and dropping further.

   • Consider short positions if Bulls Power remains weak.

4. Watch for Divergences:

   • If the price makes higher highs but Bulls Power does not confirm, momentum may be fading.

   • If the price makes lower lows but Bears Power doesn’t confirm, a potential bullish turn could be near.

5. Monitor Results:

   • Record each trade based on these signals.

   • Note which signals led to successful outcomes and refine your approach.

Bulls Power / Bears Power appears in many trading methods. Mastering these indicators is important for using it in one of the strategies that will be described later.