The Force Index is a technical indicator that measures the amount of power used to move the price of an asset. The term and its formula were developed by psychologist and trader Alexander Elder and published in his 1993 book Trading for a Living. The Force Index uses price and volume to determine the amount of strength behind a price move. The index is an oscillator, fluctuating between positive and negative territory. It is unbounded meaning the index can go up or down indefinitely.
The Force Index is used for trend and breakout confirmation, as well as spotting potential turning points by looking for divergences.
• A rising force index, above zero, helps confirm rising prices.
• A falling force index, below zero, helps confirm falling prices.
• A breakout, or a spike, in the force index, helps confirm a breakout in price.
• If the force index is making lower swing highs while the price is making higher swing highs, this is bearish divergence and warns the price may soon decline.
• If the force index is making higher swing lows while the price is making lower swing lows, this is bullish divergence and warns the price may soon head higher.
• The force index is typically 13 periods but this can be adjusted based on preference. The more periods used the smoother the movements of the index, typically preferred by longer-term traders.
The Formula for the Force Index Is:
Force Index = Volume (i) * ((MA (ApPrice (i, N) - MA (ApPrice (i - 1, N)),
MA (ApPrice (i, N) - smoothed moving average of the current bar (“candles”) for N periods;
MA (ApPrice (i-1, N) - smoothed moving average of the previous bar (“candles”) for N periods;
ApPrice - price type for calculating the indicator. It is set in the indicator settings.
N is the smoothing period. It is set in the indicator settings.
MA is set in the indicator settings and can take two values: SMA and EMA
To find out more about this indicator and it`s trading signals click here.
Settings in the chart