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What is the Bears Power Indicator?

Bears Power is a technical indicator used to measure the power of Bears or Sellers and ultimately to determine the balance between them (sellers) and the Bulls or Buyers.

Used perfectly, the indicator will signal a beginning, continuation, or potential reversal of a bearish trend.

Components of Bears Power.

Bears Power is made up of the following components:

• Zero line.
• Curve, area, dots, or histogram oscillating about a zero line.

Basic Signals Provided by Bears Power.

Do you wish to generate a trading signal from Bears power?

Just observe the behavior of the Bears Power curve, area, dots, or histogram in relation to the zero line.

Bears Power indicator usually gives you sell signals only and that’s because it is related to bears or sellers.

These signals relate to when to enter and when to exit sell positions.

Basically, when the curve, area, dots, or histogram of Bears Power crosses from above to below the zero line, such is a bearish signal.

Bears Power does not give bullish entry signals but rather, signals to exit sell trades entered after it gave the bearish signal.

Are you wondering how these exit signals look?

If the Bears Power curve, area, dots, or histogram begins to cross from below to above the zero line, then that is a possible reversal point of the bearish trend.

That is the signal to exit your sell position.

Bears Power Trading Strategies.

The Bears Power indicator is a well-known tool used by traders to formulate countless trading strategies.

The Olymp Trade platform provides traders with the privilege of having the Bears Power tool at their disposal.

Traders in Olymp Trade can then use it to draft profitable trading strategies.

Do you know how many trading strategies formulated with the Bears Power indicator exist? As many as there are traders who know about the tool.

But the question of whether all of them are effective and profitable is the deal-breaker for most traders.

Top 5 Bears Power Trading Strategies for Olymp Trade.

Because not all Bears Power strategies are sufficient enough to be consistently profitable, we’ve only picked the top 5 Bears Power trading strategies for this post.

• The Bears Power Divergence Trading Strategy.
• Bears Power with EMA Trading Strategy.
• Bears Power-ADX Trading Strategy.
• The Bears Power-Alligator Trading Strategy.
• Bears Power with Parabolic Trading Strategy.

1. The Bears Power Divergence Trading Strategy.

Bears Power divergence occurs where the Bears Power indicator does not directly reflect what is happening on the price.

Which is to say that where the price is making lower lows, the Bears Power is making higher lows translating to a bullish divergence.

On the other hand, where the price is making higher highs, the Bears Power is making lower highs translating to a bearish divergence.

Note that the Bears Power measures the power of Bears or Sellers and therefore determines the balance between bears and the Bulls or Buyers.

For that reason, the bears’ power tool does not give bullish or buy entry signals but only bearish or sell entry signals.

Signals which would have a bullish connotation given by the Bears Power would not mean that we should buy but rather, exit any sell positions. 

Step 1 – Signal.

The first step of this strategy is to look for a trading signal.

Bears Power gives only a bearish divergence as the entry signal.

A bullish divergence from the Bears Power is an exit signal and not a buy signal. The bearish divergence signal shows in the form described below.

• Bearish Bears Power divergence – in a bearish Bears Power divergence, prices make higher highs as the Bears Power indicator makes lower highs which must culminate in the Bears Power curve, dots, area, or histogram shifting from above to below the zero line.

That means that the price is in an uptrend but the fact that the Bears Power is making lower highs which actually read on the negative side of the tool means that the bears are gaining momentum relative to the bulls and chances are that a downward trend reversal is coming up.

Step 2 – Confirmation.

It is not always that a bearish Bears Power divergence resulting in a negative shift of the Bears Power reading will cause a downward trend reversal.

That is why you need to confirm the bearish divergence signal you get from step 1. Here is how to confirm:

• Bearish signal confirmation – the price is making higher highs as the Bears Power makes lower highs.

Draw a trend line joining the lows of the price which must be sloping upwards.

Identify the corresponding highs of the section on which you have drawn the trend line joining the lows and draw another trend line joining those highs, which must also be sloping upwards.

For confirmation that the bearish divergence will cause a downward reversal, the price must break the trend line joining the lows downwards.

Step 3 – Entry.

Enter a sell position following the confirmation of the bearish Bears Power divergence signal.

Step 4 – Exit.

Exit the Sell position once the Bears Power curve, dots, area, or histogram shifts from the negative side below the zero line to the positive side above the zero line.

2. Bears Power with EMA Trading Strategy.

This strategy, as the name suggests, brings together the Bears Power indicator and the Exponential Moving Average (EMA) to form a trading strategy.

Exponential Moving Average (EMA) Explained.

The Exponential Moving Average is a technical indicator that calculates and shows the average of a given range of prices of an asset over a specified number of periods.

In this strategy, the EMA used is applied to 13 periods.

EMA is different from other moving averages because it places a greater significance on the most recent data in its calculation, making it a more preferable moving average.

EMA presents in the form of a continuous line on the main chart.

The calculations are presented in the form of a line connecting the results of the calculations in a smoothed continuous line.

When the EMA is sloping upwards and the price is trading above it, then the market is on an uptrend.

However, when the EMA is sloping downwards and the price is trading below it, then the market is on a downtrend.

The Bears Power, EMA Indicator Trading Strategy.

Step 1 – Signal.

Bears Power, as we had earlier mentioned, deals with only bearish entry signals.

Signals which would appear as bullish and related to the tool are only exit signals from any sell position.

Here is how the bearish signal looks like:

• Bearish EMA signal – for a bearish EMA signal, the 13-period Exponential Moving Average must be sloping downwards and the price having crossed to trade below it.

Step 2 – Confirmation.

We can then proceed to use the Bears Power tool to confirm the bearish signal obtained using EMA.

Here is how to confirm the signal:

• Bearish signal confirmation – the curve, area, dots, or histogram of Bears Power must have recently crossed from above to below the zero line.

Step 3 – Entry.

Enter a sell position after the successful confirmation of the bearish signal.

Step 4 – Exit.

Exit the Sell position once the Bears Power curve, dots, area, or histogram shifts from the negative side below the zero line to the positive side above the zero line.

Alternatively, exit the sell position once the price crosses over to begin trading above EMA 13.

3. Bears Power-ADX Trading Strategy.

This strategy blends the Bears Power indicator with the Average Directional Index (ADX) for profitable trading. 

Average Directional Index (ADX) Explained.

The Average Directional Index is a chart analysis tool that helps measure the strength of a trend, whether uptrend or downtrend.

The indicator is made up of the ADX curve/histogram/area/dots, the +DI curve/histogram/area/dots and the -DI curve/histogram/area/dots.

The three elements oscillate between 0 and 100 levels as we will see in the chart below.

In brief, the ADX oscillator will be represented by three lines crossing over each other and moving on a scale that runs from 0 to 100.

The ADX oscillator and all its components will not display on the main chart but on a window separate to and below the main chart.

Basically, you will be using the ADX to measure the strength of an uptrend or a downtrend.

It will be an uptrend if the +DI element is above the -DI element.

Conversely, it will be a downtrend if the -DI element is above the +DI element.

Have you established which trend it is using the +DI and the -DI relations?

The next thing is to measure the strength of that trend using the ADX curve, histogram, area, or dots.

A reading of the ADX element below 20 translates to a weak trend while a reading above 50 means the trend is strong.

A +DI element above a -DI element coupled with a reading of above 50 of the ADX element means that the market is strongly trending upwards.

On the contrary, A -DI element above a +DI element and a reading of ADX element above 50 means that the market is strongly trending downwards.

 

The Bears Power-ADX Trading Strategy.

Did it take you more than a minute to grasp the fundamentals of the ADX?

It is that simple, and understanding the Bears Power indicator is even simpler, as discussed in the introduction.

Step 1 – Signal.

I think I should not overemphasize the fact that Bears Power is a bearish indicator and therefore only bear-related signals can do with this tool.

Here is how the bearish signal works: –

• Bearish Bears Power signal – the curve, area, dots, or histogram of Bulls Power must cross from above to below the zero line.

Step 2 – Confirmation.

It is now time to use the ADX.

We shall use it to confirm our signal obtained using the Bears Power indicator.

Here is how to go about the confirmation:

• Bearish signal confirmation – the -D element of the ADX must be above the +D element and the ADX line must be reading above 50. That way, you are sure that the price is trending downwards with huge strength.

Step 3 – Entry.

Enter a sell position after the successful confirmation of the bearish signal.

Step 4 – Exit.

Exit the Sell position once the Bears Power curve, dots, area, or histogram shifts from the negative side below the zero line to the positive side above the zero line.

Alternatively, exit the sell position once the ADX reading dips below 20 or the -D components dips below the +D component of the ADX.

4. The Bears Power-Alligator Trading Strategy.

This particular strategy combines the Bears Power indicator with the Alligator indicator into one powerful trading strategy. 

The Alligator Indicator Explained.

The Alligator is a trend technical analysis tool that uses three smoothed moving averages to ooze trading signals.

Alligator indicator will show you the direction of the general trend so that you can trade in that direction and profit from the trend.

It also shows you possible trend reversals so that you can catch a new trend as early as possible for maximum gain.

The Alligator indicator is represented by three lines of different colors on the chart.

Those lines are the tool’s moving averages we are talking about, which show the trend direction and possible reversals depending on their orientation and direction.

In any setting, the three moving averages of the Alligator will arrange themselves such that the lip (green line) is closest to the price, followed by the teeth (red line), and then the jaw (pale blue line).

What that means is that if you spot the three lines arranged in ascending order from the jaw to the lip, then the market is on an uptrend.

Conversely, where the three lines arrange themselves in descending order from the jaw to the lip, then the market is on a downtrend.

The aspect of reversal comes in where you spot the three lines changing from one order to another.

This implies a change from one trend to another and so a possible trend reversal from the incumbent trend to the opposite.

The Bears Power-Alligator Strategy.

The Alligator is that simple and I know you have understood how it works.

With Bears Power, there is no question because you already have known it in and out. So how does a trader use these two tools in a strategy? Very easy.

We shall use the Alligator as the primary indicator to generate signals.

We shall then confirm such signals with the Bears Power indicator before entry.

Step 1 – Signal.

Should I keep mentioning that the Bears Power indicator deals only with bearish signals?

• Bearish Alligator signal – the three lines of the Alligator indicator must shift from an ascending order of jaw (pale blue), teeth (red), and lip (green) to a descending order of jaw (pale blue), teeth (red), and lip (green).

It is even a stronger signal when the price shifts from above the three lines to below the three lines after the order of the lines has been met as specified.

Step 2 – Confirmation.

Did a perfect bearish signal as specified above form?

Then you are ready to proceed and the way to do so is to first confirm such signal before entry. Here is how to confirm:

• Bearish signal confirmation – the curve, area, dots, or histogram of Bears Power must have recently crossed from above to below the zero line.

Step 3 – Entry.

Enter a sell position after the successful confirmation of the bearish signal.

Step 4 – Exit.

Exit the Sell position once the Bears Power curve, dots, area, or histogram shifts from the negative side below the zero line to the positive side above the zero line.

Alternatively, exit the sell position once the lines of the Alligator begin coming closer to each other and shifting from the descending order of jaw, teeth, and lip to the ascending order of jaw, teeth, and lip.

5. Bears Power with Parabolic SAR Trading Strategy.

The Bears Power indicator and the Parabolic SAR indicator are blended together in perfect harmony to trade profitably in this strategy.

Strange how I could just say that, yet you don’t know what the heck this parabolic SAR thing is.

Let me explain.

Parabolic SAR Indicator.

Parabolic SAR means parabolic Stop and Reverse.

It is a technical analysis tool that determines the direction the price of an asset is moving.

It does so by showing potential reversal points of the price, where the current trend ceases and a new one begins to form.

The Parabolic SAR is represented by dots that correspond to each candlestick that forms.

It is those dots that it uses to show potential price reversal points, but how?

Usually, whenever the Parabolic SAR dots are above the price of an asset, such price is on a downtrend.

Conversely, whenever the Parabolic SAR dots are below the price, such price is on an uptrend.

Meaning that where the dots of the parabolic SAR were above the price of an asset but a new dot forms below the price, an uptrend has just begun.

On the contrary, where the dots were below the price but a new dot forms above the price, a downtrend has just begun.

The Strategy.

For this strategy, we shall use the parabolic SAR as the primary indicator.

That means we shall use it to obtain signals which we will then confirm using the Bears Power indicator.

Step 1 – Signal.

• Bearish Parabolic SAR signal – to resort to a bearish signal, the parabolic SAR dots must shift from below the price to above the price.

Note also that a reasonable number of parabolic SAR dots must have formed above the price before using such a signal.

I say that because, at times, the dots keep shifting from below to above the price and then back below the price again, leaving the trader confused.

Step 2 – Confirmation.

Do you have your bearish signal ready?

The next thing is to have it confirmed by the Bears Power indicator before you proceed to enter. Here is how to confirm the signal:

• Bearish signal confirmation – the curve, area, dots, or histogram of Bears Power must have recently crossed from above to below the zero line.

Step 3 – Entry.

Enter a sell position after the successful confirmation of the bearish signal.

Step 4 – Exit.

Exit the Sell position once the Bears Power curve, dots, area, or histogram shifts from the negative side below the zero line to the positive side above the zero line.

Alternatively, exit the sell position once the parabolic SAR dots shift from above to below the price and a reasonable number of them form below the price.

Wrapping Up.

Almost every trader in Olymp Trade is using the Bears Power indicator or has used it at some point in their trading journey, making the tool so popular.

If there are any Bears Power trading strategies that we have not mentioned go ahead and post them in the comment section.

Happy Trading!