A very rarely used indicator in market technology is the BBB indicator, which is also displayed in the form of two histograms, namely the bull and bear power histograms. As the name suggests, both histograms should measure the force of the price movement and indicate which of the two bearings predominates when determining the forces.
Although the statement is simple, the use of the double indicator is not quite as simple. On the other hand, rarely used indicators can also help you to gain an advantage, according to the motto: Something that is not as widespread is also subject to little competition.
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Calculation of the bull and bear histograms
The indicators divide the market into two phases, namely the phase in which today's closing price is below yesterday's and the other in which the closing price is higher than yesterday. If a phase consists mainly of rising closing prices, the power of the movements is assigned to the bulls and vice versa.
In addition, the candle shadows are considered so that the greater value of the two shadows of the candles is given greater weight. The course ranges are also included within one day.
At the end, the two forces are shown in the form of histograms. In many cases and on analysis platforms, however, it is also possible to form a difference from the histograms and display them in the form of a line. A further optimization is possible by smoothing the difference. However, we will only consider the simple variant for the purpose of illustration.
Interpretation of the histograms
As already indicated, the difference between the two histograms is the decisive point. However, the difference is also easily recognizable because the histograms have values of different heights or depths. The following interpretations are usually used:
- If the Bulls Power histogram is above the zero line, the bulls are currently gaining strength.
- If the Bears Power Histogram below the zero line, the bears gain strength.
If we look at the upper chart, it becomes clear that the Bulls-Power-Histogram shows higher values in bullish phases. In bearish phases it is the other way round; the Bears Power histogram shows the lower values. The chart also shows that the Bears Power histogram for signaling should be below the zero line for a bearish phase, but above the zero line for a bullish phase.
However, the interpretation rules only show us phases However, we have not yet seen any advantage. This must result from a more detailed examination of the histograms. Let's take a closer look at the trends we are looking for.
It is noticeable that the histograms were a good indication for the development of trends. In both cases, an exuberance from bullish to bearish or vice versa could be identified very early. In the first case, the bullish power declined fairly quickly (falling line), while the bearish power fell below the zero line before the bullish one (first circle). The signal was also accompanied by the break of the horizontal support line.
The transition to the upward trend was also recognized early on using the histograms. In this case, the Bears Power histogram rose very quickly (rising line), which speaks for the weakening of the bearish forces. The Bulls power then rose above the zero line. Here, too, the horizontal resistance line was overcome shortly thereafter and possibly used as an entry level. Both histograms can therefore - even without forming the difference - provide good signals; you just have to recognize them and use them in conjunction with technical setups.
FIGHT!!! BEAR vs BULL - Binary Options Strategy
Conclusion - Bears and Bulls power are simple
The Bull and Bear Balance histograms are a good one Example of how indicators can also be over-optimized. As a rule, the histograms are not used individually, but as a difference and additionally smoothed by moving averages. The example above shows very well that this is not always necessary.
With the histograms, good signals for emerging trends can be obtained by going into more detail. Rapidly decreasing values in a histogram usually indicate the end of the prevailing trend. If the other histogram crosses the zero line shortly thereafter, a reversal and the formation of a new trend can be assumed.
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