Elder Thermometer Indicator Explained

Alexander Elder's Market Thermometer measures each bar's reach beyond the previous bar — how much new ground the high or low broke. Compared to its own average, it reads the market's temperature: hot bars mean crowds piling in, cold bars mean apathy.

How It Works

• Temperature = the larger of |high − prev high| and |low − prev low|.
• An EMA of temperature defines 'normal' for the market.
• Readings far above the EMA flag hot, emotional bars; far below, dead ones.

How to Trade It

Elder's guidance: enter during cold periods (calm markets fill orders kindly) and take profits into hot spikes (emotion pays the exit). A temperature spike of 2–3× the average on trend bars often marks short-term climax.

Building It in Setup.Cash

Add Elder Thermometer in the strategy builder — the length input controls its sensitivity — and use its value in any entry, exit, or filter condition. You can also combine it with other tools in the Indicators Lab or via the AI indicator generator. Compare with True Range shock detection. For the full category overview, see the volatility & statistics library guide.

Volatility indicators qualify trades rather than generate them — backtest your system with and without this filter and compare the drawdowns.