The Elder Ray is an oscillator and combines components of trend and momentum indicators to measure the strength of the bullish and bearish trends. This indicator labels both trends as “bull power” and “bear power”.

It combines exponential moving averages (EMA) to generate signals and pinpoint the dominant power of the market. Its reasoning is based on the direction of the trend of an asset. When it’s upward, most of the traders become bullish, and when it’s downward, bearish.

The Elder Ray signals a buy when the bull power is larger than the bear power. Likewise, it gives a sell signal or opens a short when the bear power is larger than the bull power.