What is the 'Force Index'

Force index is a numerical measure of the market power of a movement in the price of a stock. The term and its formula were developed by psychologist and trader Alexander Elder in a 1993 book.


The force index measures the market power behind movement in the price of a stock. The index’s value can be positive or negative, depending on the upward or downward movement in the share price. The formula requires three inputs: the stock’s closing price at the end of a period, the closing price at the end of the previous period and the trading volume during the period. The resulting index value can be positive or negative, and can be used by traders to signal or confirm trends and price corrections. Analysts often use the force index in conjunction with the moving average to formulate predictions for a stock’s future performance.

Alexander Elder introduced the force index in his 1993 book,Trading for a Living. To calculate the index for one-day period, Elder developed the following formula:

Force Index = (Current period close - Previous period close) x (Current period volume)

The formula above uses end-of-day prices to track movement, but this formula can be adjusted to cover any period of time. Day traders have used the index to analyze a stock’s movement over a period of hours. Elder recommended a 13-day period to minimize the variability of the force index over a shorter period. To further account for day-to-day spikes in the index, Elder suggested coupling it with the exponential moving average over that same period to most effectively smooth the upward and downward swings over a particular time period.

How Traders Use the Force Index

Traders often look for divergence of the force index and the movement of a stock price. Such a separation can be a signal of an imminent reversal in the movement of that price. A period in which share price declines but the force index moves higher suggest a bullish turn is approaching. A period of price increase but weakening force index hints at a bearish trend.

The force index is one of many indicators that traders use for predictive analysis, and it is best accompanied by other supporting measures to confirm or challenge conclusions reached from the force index alone. Envelope channels come in several varieties, but are generally charting tools that draw from exponential moving averages that alert traders to buying or selling opportunities. Convergence between indicators such as envelope channels and the force index provides traders with a strong signal to take market action.

  1. Klinger Oscillator

    The Klinger Oscillator was developed by Stephen Klinger to determine ...
  2. Disparity Index

    A technical indicator that measures the relative position of ...
  3. Forced Conversion

    A forced conversion allows an issuing company to make a security ...
  4. Indexation

    Indexation is a method of linking the price or value of an asset ...
  5. True Strength Index - TSI

    The true strength index is a technical momentum indicator that ...
  6. False Signal

    In technical analysis, a false signal refers to an indication ...
Related Articles
  1. Trading

    Triple Screen Trading System - Part 3

    Learn about market wave, the second screen in this three-part system.
  2. Trading

    Introduction to Swing Trading

    The swing trading style, between day trading and trend trading, may be a good one for beginners to try.
  3. Personal Finance

    Market Economy

    In a market economy, economic decisions and prices are determined by market forces rather than by central planning.
  4. Financial Advisor

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
  5. Trading

    Using index futures to predict the future

    Want to know whether the stock market will open up or down? Learn about index futures and how they can help predict how the market will trade.
  1. What are the best technical indicators to complement the Stochastic Oscillator?

    Explore the function of the stochastic oscillator indicator, and discover other technical indicators traders use to complement ... Read Answer >>
  2. Why is trading volume important to investors?

    Learn about trading volume, its importance and how investors analyze volume to confirm a trend or reversal in a security. Read Answer >>
  3. How Do I Find Mutual Funds That Track Indexes?

    Two good sources for finding index funds are Fidelity Investments and Vanguard. Read Answer >>
  4. What is a "force majeure"?

    A force majeure is derived from the French term meaning "greater force" and refers to any natural and unavoidable catastrophe. ... Read Answer >>
  5. Why can you short sell an ETF but not an index fund?

    Because you purchase and redeem mutual fund units from the mutual fund company and (generally) not on the open market, you ... Read Answer >>
Hot Definitions
  1. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  2. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  3. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  4. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  5. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center