Our version of the Force Index indicator comes with the option of calculating with Relative Volume. For additional information on the Relative Volume indicator, please refer to this blog post. Next, one may normalize the oscillator values by activating that option in the indicator dialogue box. A blogpost on why normalizing oscillator values is useful was discussed in our Indicator Spotlight on the Z-Score indicator. 4xdev company focuses on the development of various Forex tools (e.g., indicators, EAs, scripts, alerts) and conversion of ones into the needed format. After all the sides of the indicator were revealed, it is right the time for you to try either it will become your tool #1 for trading.
If there is a high volume and there is a high price move, then FI values will be higher. The Elder Force Index identifies the force behind the price move and helps locate key market reversals. Any information contained in this site’s articles is based on the authors’ https://day-trading.info/ personal opinion. These articles shall not be treated as a trading advice or call to action. The knowledge and experience he has acquired constitute his own approach to analyzing assets, which he is happy to share with the listeners of RoboForex webinars.
His force index is an oscillator that measures the force, or power, of bulls behind particular market rallies and of bears behind every decline. To this point, the setup requires that you wait for the indicator to produce an extreme reading to either the up or down side. Again, these high readings just mean you have had sharp price movement with increased volume.
Vice versa, if the closing price is lower than the previous one, the indicator will be negative showing the bears’ force. As a result, it’s worth watching the moments when the FI crosses the zero line. Apart from the general market analysis, the Force Index gives signals by the trend and forecasts future reversal points by divergences. See more details about the indicator in the books by Alexander Elder.
The indicator was first used in the stock markets and then adopted in the crypto markets. Bitcoin’s buying and selling force can be identified similar to blue chip stocks. Elder’s Force Index (EFI) is a technical indicator designed to measure a stock’s current buying and selling activity. The Money Flow Index (MFI) and the Force Index employ price and volume to gauge trend strength and identify possible price reversals. The MFI employs a more intricate formula incorporating the typical price (high + low + close / 3) instead of solely relying on closing prices. As a result of its distinct computation and bounds, the MFI can provide unique insights that differ from the Force Index.
Another entry method must be used in conjunction with divergence to make it useful for trading purposes. When the indicator moves below its own small range created around the zero line, it signals the start of the price downtrend. When the indicator rallies back above zero it indicates the potential for a price uptrend. At the same time, if the price changes by inertia, the FI will move only slightly. The uptrend weakens if the current price increases but the indicator is not. When the above guidelines fail that may indicate a problem with the price/trend, and therefore a potential price reversal.
A big advance on heavy volume shows a strong commitment from buyers. Likewise, a big decline on heavy volume shows a strong commitment from sellers. The Force Index quantifies these three elements into one indicator that measures buying and selling pressure. The Force Index is an indicator that uses price and volume to assess the
power https://forexbox.info/ behind a move or identify possible turning points. The Force Index can be used to
reinforce the overall trend, identify playable corrections or foreshadow
reversals with divergences. The force index is an indicator that uses both price and volume to measure the strength of a trend and identify potential price reversals.
The indicator can be used as a secondary indicator in your trading strategies, and you can use the Elder Force Index and other indicators for further signal confirmation. https://bigbostrade.com/ This allows making a better judgment about a trend and its momentum. When the Force Index gets to a new high, the current uptrend is likely to continue.
A longer or shorter period for the indicator may give you different points of divergence or none at all. I have found that there are times even with different settings, the change in the shape of the indicator is very subtle. Since the Force Index shows the strength of the buyers and sellers, it can show, depending on the setting, the direction of the momentum price trend. Here is an example of a 13 period Force Index and and 90 day Force Index. Ultimately, the optimal settings and timeframes for the EFI will depend on the trader’s individual preferences and trading style. It is important to experiment with different settings and timeframes to find what works best for your own trading strategy.
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The chart above shows Best Buy (BBY) with the Force Index (39) sporting a series of divergences. The green lines show bullish divergences and the red lines show bearish divergences. A bullish divergence is confirmed when the Force Index (39) crosses into positive territory (green dotted lines). A bearish divergence is confirmed when the Force Index (39) crosses into negative territory (red dotted lines).