Force Index

The Force Index is a technical analysis tool developed by Alexander Elder. It aims to measure the strength of price movements and evaluate the power behind trends by combining price and volume data.

To calculate the Force Index, the following steps are followed:

1. The Force Index starts by subtracting the previous day’s closing price from the current day’s closing price.

Force Index = Current Closing Price – Previous Day’s Closing Price

2. The resulting value measures the daily price change. A positive value indicates an upward price movement, while a negative value indicates a downward price movement.

3. Volume is also incorporated in the calculation of the Force Index. Volume is weighted based on the price change. Days with higher volume have a greater impact than days with lower volume.

4. The Force Index value is obtained by multiplying the price change calculated in the previous step by the daily volume.

The Force Index is often used in conjunction with a 13-period Exponential Moving Average (EMA). This helps to smooth out the Force Index values and provides a better visualization of trends.

The application of the Force Index is primarily focused on determining the strength and momentum of a trend. Positive values indicate a bullish market and upward trend, while negative values indicate a bearish market and downward trend. Additionally, crossovers of the Force Index above or below the zero line can be used as signals for potential changes in price direction.

The Force Index can be used in combination with other technical analysis tools to confirm price movements and identify potential entry or exit points. However, relying solely on the Force Index may lead to false signals, so it is recommended to use it in conjunction with other indicators and analysis methods.