Force Index

Definition of 'Force Index'


The Force Index is an oscillator that fluctuates above and below zero. It combines price movement and volume to assess the force behind price movements and spot potential trend changes. Use the following calculation to produce a 1-period Force Index:

  • Force Index (1) = [Close (current period)  -  Close (prior period)] x Volume
Alexander Elder, the creator of the indicator, suggested using a 13-period Force Index:

  • Force Index (13) = 13-period exponential moving average of Force Index(1)
The 13-period Force Index confirms short-term uptrends when above zero, and confirms short-term downtrends when below zero. When the Force Index Diverges with price, it indicates a trend change may be coming.

Investopedia explains 'Force Index'


Alexander Elder, a trader and author, introduced the Force Index in his book, Trading For a Living. Many traders use the 13-period Force Index, but longer-term traders may use a longer period, such as a 100-period Force Index. The longer the period, the less volatile the index, and the fewer warning signals it will generate.

A cross above or below the zero line signals an upward or downward (respectively) price move is possibly beginning. False signals are common with the 13-period Force Index. Increase the period to reduce the number of false signals.

When the Force index is moving higher and the price is moving lower, it warns the price downtrend is losing power and could soon reverse. When Force Index is moving lower as the price is moving higher, it warns the price uptrend is losing power and could soon reverse. Divergence is not a timing signal though, as the indicator and price can diverge for extended periods of time before an actual price reversal occurs.

The Force Index is commonly used with other trending indicators, such as a moving average to filter trade signals. 



comments powered by Disqus
Hot Definitions
  1. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  2. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  3. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  5. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  6. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
Trading Center