Force Index - Description and Trading Techniques

Force Index - Description and Trading Techniques



Force Index is the second technical indicator Alexander Elder wrote in his book Trading for living.

This measures the strength of the buying power behind all rallies and the power of the selling forces behind all the downs.

The strength index uses three market information.

1. Direction of Price Change

2. The degree of change

3. Volume


It is more effective to make smooth using the moving average line.

So, the force index is divided into two indicators, a short term and a long term.

1. Short Term (2 days): Easy to get into precise entry and exit time

2. Long Term (13 days): You can see the change of the strength index and the important trend of the sales.



How to construct force index?


Force index = volume of trading on the day * (closing price on the day - closing price yesterday)


= Q (T) * [P (T) - P (T-1)]

The center line is zero. Since the trading volume is always positive, the Force index is positive when the stock price rises, and the Force index is negative when the stock price falls.




The Short-term Index is used for trading.

So, when the Force index short-term is the upward trend in negative, we buy it.

Force index Short-term sells when it is in a downward trend in positive.



The Long Term Index is suitable for tracking long term changes in buy and sell.

A rise above the center line indicates that the buyer is dominant, while a change to negative indicates that the seller is dominating.

The divergence between price and long-term index represents an important inflection point.



Price reflects the thinking of market participants.

Trading volume reflects their feelings.

Force indexes combine price and volume. This makes it possible to judge whether the market's head(logical) and chest(illogical) are engaged with each other.





This is the buying point using the long-term index.

In the negative state, it is the buying timing when riding an upward trend.


Let's look at Samsung Electronics case.

It can be seen that when you buy a rising trend in negative numbers, you are usually buying points.


#Force Index, #Alexander Elder