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The chart above shows the Force Index in action. So, this is the basic manner in which force index can be used alone, or in conjunction with a moving average, to identify whether bulls or bears have control of the market. EFI can temporarily drop into negative territory when price dips before continuing the uptrend.
The day EMA of the force index is a longer-term indicator, and, when it crosses above the centerline, the bulls are exerting the greatest force. Technical indicators Economics and finance stubs.
As noted above, there are three elements to the Force Index. On the opposite side of the matter, a flattening force index could indicate a trend reversalif a high volume corresponds with only a small move in prices. No action is taken on the bearish divergence - the EMA is still rising. However, the Elder's Force Index had a idnicator below a trend line, which was an early indication that the force or strength behind the move was dissipating.
Forec can never call Alexander Elder a humble guy as he decided that the best name for his indicator would be that of his own last name.
Elder's Force Index (EFI) - TradingView Wiki
inxicator If closing prices are higher today than yesterday, the force is positive. Of particular importance are inndex between a day EMA of force index and prices, which correspond with precise points, indicating crucial turning points of the market.
This scan searches for stocks where the Force Index is in negative territory and the Commodity Channel Index 20 is overbought. Alexander Elder is one of the contributors to a newer generation of technical indicators. Views Read View source View history.
This scan searches for stocks indicafor the Force Index is in positive territory and the Commodity Channel Index 20 is oversold. The same is true for the Elder's Force Index indicator. The Force Index for more than one day is simply an exponential moving average of the 1-period Force Index. Different periods of EFI can be used to identify shorter or longer-term trends.
The Elder's Force Index is an oscillator, which attempts to identify indicxtor force or strength of a move. A bullish divergence can be confirmed with the Force Index moving into positive territory or a resistance breakout on the price chart.
The green lines show bullish divergences, while the red lines show bearish divergences. Since the Elder's Force Index can trend in one direction without boundaries, the EFI will indicxtor produce longer-term trends.
Discovering the Force Index
ondex Here is a further breakdown. The trend in question, short-term, medium-term or long-term, depends on the Force Index parameters. The Force Index 39 captures medium-term fluctuations and is smoother.
This can make it easier to identify bullish and bearish divergences. Approximation with the help a short moving average the author proposes to use 2 intervals contributes to finding the best opportunity to open and close positions. The raw index is rather erratic and better results are achieved by smoothing with a 2-day or day exponential moving average EMA.
As you can imagine, if we are talking about a stock with high volume, the EFI readings will be pretty high. A big move on big volume produces a high Force Index values. These traders, however, should always keep in mind the overarching principle of trading in the direction of the day EMA of prices. See How Tradingsim Works.