Elder Ray Index: Bull Power, Bear Power and the 13-Day EMA on NSE Charts

Most indicators tell you whether price is going up or down. The Elder Ray Index asks a slightly sharper question: on any given day, how far could the buyers push price above the market’s idea of fair value, and how far could the sellers drag it below? Dr Alexander Elder built it around a single 13-day exponential moving average and two simple subtractions. That’s the whole maths. The tricky part is reading it well, and that’s what this guide is about.

We’ll go through the formula, work out a five-day example by hand, look at the buy and sell rules Elder laid out, and then be honest about where the indicator lets you down on a choppy NSE chart.

What the Elder Ray Index measures

Elder treated the 13-day EMA as the market’s consensus of value. Price sits above it or below it, and the gap tells you who’s in charge. The Investopedia explainer on the Elder-Ray Index describes it as a measure of buying and selling pressure made of two parts, bull power and bear power, both derived from that 13-period EMA.

• Bull power is the ability of buyers to drive price above the consensus of value. It uses the day’s high.
• Bear power is the ability of sellers to push price below that consensus. It uses the day’s low.

Think about what a day’s high really is. It’s the furthest the buyers managed to lift price before they ran out of steam. The low is the mirror: the deepest point the sellers reached. Elder’s idea was to measure both against the average and watch how those distances change over time. A single reading means little. The direction of the readings, day after day, is where the information is.

The formula, step by step

Here’s the calculation as Investopedia and Incredible Charts both set it out:

• Bull Power = Day’s High minus the 13-day EMA
• Bear Power = Day’s Low minus the 13-day EMA

The EMA is calculated on closing prices. The usual smoothing multiplier, per Investopedia’s EMA guide, is 2 divided by (number of periods + 1). For 13 days that’s 2/14, or roughly 0.1429. Each day the new EMA equals today’s close times the multiplier, plus yesterday’s EMA times (1 minus the multiplier). The very first EMA is normally seeded with a simple average of the opening stretch of closes, which is why two platforms can show slightly different values for the first few weeks of data.

Nothing stops you from using it on other timeframes. Investopedia notes that the period high and low can come from a daily chart or a one-hour chart, and that Elder himself used a 26-period EMA when he looked at weekly charts.

On screen, the standard layout has three panes: the price chart with the 13-day EMA on it, a bull power histogram and a bear power histogram, each with a zero line. Some platforms squash the two together. TradingView’s built-in Bull Bear Power indicator, which it says is otherwise known as the Elder-Ray Index, adds bull power and bear power into one line, with a default EMA length of 13. That single line is handy for a quick look, but you lose the separate story each side is telling, so we’d keep the two histograms if your charting tool allows it.

A single bull power or bear power reading means very little. The direction of the readings over several sessions is where the information is.

A worked example with five trading days

Let’s run the numbers on a hypothetical NSE stock. These prices are made up purely to show the arithmetic. Say the 13-day EMA stood at ₹1,000.00 at the close of the day before our window starts, and the stock has been in a gentle uptrend.

Take Day 1 to see the mechanics. The close is ₹1,018, so the new EMA is 1,018 × 0.1429 + 1,000 × 0.8571, which comes to about ₹1,002.57. Bull power is the high minus that, 1,022 − 1,002.57 = +19.43. Bear power is the low minus the EMA, 1,004 − 1,002.57 = +1.43. Every other row follows the same three steps.

Now read the table as a story rather than a set of sums.

• Days 1 and 2: both readings are positive. Even the day’s low stayed above the EMA. Buyers are firmly in control and there’s nothing to do except hold if you’re already in.
• Day 3: a pullback. Bear power drops below zero to -12.79 as the low slips under the average. Bull power shrinks but stays positive.
• Day 4: the sellers dig a bit deeper. Bear power falls to -17.53. Notice the EMA itself has flattened and actually ticked down from ₹1,003.92 to ₹1,002.53 over these two days.
• Day 5: bear power is still negative at -6.46, but it has risen sharply from the previous day. Bull power jumps back to +15.54 and the EMA turns up again to ₹1,004.46.

Day 5 is the textbook buy setup we’ll describe in the next section: bear power below zero but rising, while the EMA points up. A trader working this signal might buy around the Day 5 close of ₹1,016 and put a stop just under the Day 4 low of ₹985, say at ₹984. That’s ₹32 of risk per share. If you have ₹5 lakh in the account and limit risk to 1% per trade, that’s ₹5,000 at stake, which works out to about 156 shares (5,000 ÷ 32 = 156.25, rounded down). Again, this is our own arithmetic on made-up prices, not a recommendation.

One honest wrinkle: on Days 3 and 4 the EMA slope was not pointing up. A strict reading of Elder’s rule says you don’t buy until it turns back up, which is exactly why the setup only becomes valid on Day 5 and not on Day 4, even though Day 4 looks like the better price in hindsight.

Elder ray index buy and sell rules

Elder’s rules start with the trend, and the trend comes from the slope of the 13-day EMA. Incredible Charts puts it bluntly: only trade in the direction of the trend shown by that slope.

The long setup

Investopedia’s version of the buy conditions is: the EMA is rising, bear power is below zero but increasing, and the latest peak in bull power is higher than the previous one. In plain terms, the stock is in an uptrend, it has dipped below its average, and the sellers are already losing their grip on that dip.

Incredible Charts states the long signal as bear power below zero together with a bullish divergence. That means price makes a lower low while bear power makes a shallower low. The sellers pushed price further but couldn’t push as hard relative to value.

The short setup

Flip everything. The EMA is falling, bull power is above zero but declining, and the latest low in bear power is lower than the one before it. A bounce in a downtrend is running out of buyers. Incredible Charts states it as bull power above zero together with a bearish divergence.

Adding to a position

Incredible Charts also lists Elder’s pyramiding rules. In a long trade, you add whenever bear power dips below zero and then rises back into positive territory. In a short trade, you add when bull power rises above zero and then falls back into negative. These are rules for building on a trade that’s already working, not for opening a fresh one.

The rule that saves traders the most money with this indicator is the boring one: don’t take a signal against the slope of the 13-day EMA.

Where it fits with other tools

Incredible Charts notes that Elder-ray is often used as part of Elder’s Triple Screen trading system, though it can also be used on its own. One simple way to combine timeframes yourself is to check the weekly trend before acting on a daily Elder Ray setup, using the 26-period EMA that Elder used on weekly charts.

Investopedia compares it with the Average Directional Index. ADX is built from +DI and -DI, which also track upward and downward movement, but those are smoothed and divided by the average true range. So the two tools are measuring a similar thing in very different ways and will give different signals on the same chart. We’d treat them as two opinions, not one opinion repeated.

Because Elder Ray leans so heavily on the EMA slope, it pairs naturally with a trend-following stop. Our guide to the trailing stop loss strategy covers point, percentage and ATR-based trails you could use once a long setup is in profit. If you’d rather use volatility bands around the same kind of average, the Keltner Channel indicator is a close cousin, since it also starts from an EMA.

Where the Elder Ray lets you down

It whipsaws. Investopedia flags this directly: bull power and bear power often oscillate above and below zero, and in a sideways market you’ll see one false setup after another. A stock that’s drifting sideways in a range is exactly where this indicator struggles, so check whether there’s a trend at all before you read the histograms.

It lags. The whole thing is anchored to a moving average, so by construction it’s working from past prices. Investopedia points out that a sell signal can arrive after price has already dropped a long way. That’s the reason to set a stop the moment you take the trade, not after.

Gaps distort it. Stocks can gap on quarterly results, block deals or overnight global cues. A big gap up lifts the high far above a slow-moving EMA, so bull power spikes in a way that says more about one session’s news than about a building trend. We’d be wary of reading divergences that straddle a results date.

The 13-day setting isn’t magic. It was Elder’s choice for daily charts, and TradingView keeps 13 as its default. If you use it unchanged on an hourly chart, remember that 13 hourly bars is a far shorter window than 13 trading days, so the “consensus of value” becomes very short-term.

A quick checklist before you act on a reading

• Check the 13-day EMA slope first. If it doesn’t agree with the signal, there’s no trade.
• For a long, look for bear power below zero and rising, ideally with a bullish divergence. For a short, bull power above zero and falling.
• Look back three to five sessions, not just today. The direction of the readings matters more than any one number.
• Mark the swing low (or high) behind the setup and place a stop beyond it before you enter.
• Check the calendar. A results date or an ex-date inside your window can produce a gap that makes the readings unreliable.
• Size the position from the stop distance, not from how confident you feel.

If you’re still building your toolkit, our technical analysis for Indian stocks guide puts indicators like this in context alongside support and resistance, candlesticks, RSI and MACD.

Disclaimer: This article is for educational purposes only and is not investment advice. The prices, EMA values and position size in the worked example are hypothetical and were calculated by us to illustrate the formula. Indicator rules are summarised from the linked sources. Trading in stocks and derivatives involves risk of loss. Please do your own research and consult a SEBI-registered investment adviser before making any investment decision.