Technical Indicators: Force Index Introduction

Introduction

The Force Index is developed by Trading for a Living fame author Alexander Elder , is an oscillator that measures the force of bulls behind particular market rallies and of bears behind every market correction.According to Elder, there are three essential elements to a Financial Instrument price movement: direction of  market move ie Up or down, extent of the move and volume.Force index is one of the best indicators for combining both price and volume.
The three key components of the force index are:

1. Direction of Price Change
2. Extent of Price Change
3. Trading Volumes

The Force Index combines all three as an oscillator that fluctuates in positive and negative territory as the balance of power shifts. The Force Index can be used to reinforce the overall trend, identify corrections and  reversals in Financial Markets.

Calculation

 

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