Last Updated on August 24, 2020 by Mark Ursell
The Elder Ray technical indicator was created by Dr. Alexander Elder. The indicator is useful for timing trade entries.
What is the Elder Ray?
The purpose of the indicator is to encourage patient trading. Using the indicator requires identifying the main trend and then waiting for the price to pull back enough to obtain a fair value entry into the trade.
The Elder Ray is comprised of two parts; Bull Power and Bear Power. Bull Power measures whether the high is above or below an EMA. Bear Power measures whether the low is above or below an EMA.
How to Use the Elder Ray Indicator
As mentioned above the Elder Ray is a good entry timing indicator. Trading using the Elder Ray forces you to identify the main trend and then wait for the price to pull back far enough to trigger an entry. If you want to enter a new long trade you would wait for Bear Power to move below the 0 line and then move back above. Likewise, if you want to trade short you must wait for Bull Power to move above the 0 line and then move back below.

In the above image the EUR/USD drops below a 40 period ema and enters a downtrend. In this downtrend we are looking for short entries. We are therefore using the Bull Power indicator and there would have been seven possible entry points (shown with arrows on the chart).
YouTube Video
Formulas Used
SMA H16 =AVERAGE(F4:F16)
EMA Factor H3 =2/(H2+1)
EMA H17 =((F17-H16)*$H$3)+H16
Bull Power I16 =D16-H16
Bear Power J16=E16-H16
Related Links
If you are interested in using Excel to backtest trading strategies my new Ebook course: How to Backtest a Trading Strategy using Excel is now available in the Amazon Kindle Bookstore.
If you want to know more about Alexander Elder’s books then check out my review of Come Into My Trading Room in the Essential Traders Library series.
If you are interested in using Excel for trading purposes you may be interested in how to calculate the following indicators:
Calculating the SuperTrend Indicator Optimising Trading Strategies using Excel Calculating Bollinger Bands Using Excel