If you watch the Forex market closely, you might be aware of the two types of traders who act on it – bulls are those who buy currency, because they believe that the market will go up; and bears – the ones who sell, because they think the market will go down.
The Bulls Power is a technical indicator that shows the strength of the bulls. It was developed and designed by Alexander Elder, who described it in his book Trading for a Living. If the indicator is above the zero, bulls are considered to be strong. If it is below the zero, they are weak. As basic concepts of the indicator we may point out that the moving average of a price indicates where buyers and sellers agree and the highest price in a day is reached when buying pressures are strongest.
Thus, the difference between highest price in a day and the moving average shows the level of strength of the bulls power.
Experts recommend that Bulls Power should be used with another trend indicator, such as the moving average price. A certain signal to sell could appear when we have two conditions – the trend indicator is down and the Bulls Power is positive but falling.
The sell signal is stronger if it follows a bearish divergence.
The formula of the Bulls Power is calculated in the following way:
Bull Power = High − EMA
Where: High Is the highest price in a certain period of time, EMA is the exponencial moving average.
The Bulls Power is used extensively in conjunction with the Bear Power, an indicator that is also developed by Elder. This compilation could be used as a single indicator to produce buy and sell signals.