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Main » Articles » Trading Strategy

Bulls Power Bears Power Strategy

As their names show, these indicators determine the power of the bulls and the bears to move the market up or down respectively. Bulls power is the difference between the high of the current bar and the 13-period exponential moving average, while the difference between the low of the current bar and the 13-period exponential moving average. Dr. Alexander Elder who created these indicator points out that the high of the bar shows the maximum power of the bulls, while the low shows the maximum power of the bears. The Exponential moving average represents the equilibrium of the price. During an uptrend prices are above the exponential moving average and the indicator has positive values. During a downtrend prices are below the exponential moving average and the indicator has negative values.

Bulls and bears power generate the following signals:

Rules for long position

  1. Price is above the 50-period Moving Average (uptrend) and Bulls power values are positive (above the 0 line).
  2. Bears power breaks the 0 line upwards. The bar when this happens is marked as Signal bar.
  3. Long position is initiated when the price breaks 2-3 pips above the high of the Signal bar.
  4. After the position is open an initial stop loss order is placed 2-3 pips below the low of the signal bar.

A limit order is placed according to our Money management rules. We can close the position when the Bears power values become negative again.

Rules for short position

  1. Price is below the 50-period Moving Average (downtrend) and Bears power values are negative (below the 0 line).
  2. Bulls power breaks the 0 line downwards. The bar when this happens is marked as Signal bar.
  3. Short position is initiated when the price breaks 2-3 pips below the low of the Signal bar.
  4. After the position is open an initial stop loss order is placed 2-3 pips above the high of the signal bar.

A limit order is placed according to our Money management rules. We can close the position when the Bears power values become positive again.

Test

During the test of this strategy with Forex Strategy Builder we found out it works best on EURUSD 1Hour chart. We changed the exit logic to Trailing Stop (80 pips). That leaves more space for the position in a volatile market.

Charts

Balance / Equity chart tested by Forex Strategy Builder

Balance

Indicator chart

Indicators

Parameters, Statistics, Strategy Slots

See the full Strategy Overview generated by Forex Strategy Builder.

Category: Trading Strategy | Added by: forex-market (2009-10-15)
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