Force Index
Volume & money flow
Alexander Elder's Force Index multiplies direction by strength: how much did the price move, and with how much volume? The result is a measure of the conviction behind a move.
In its original form this indicator uses volume and/or the daily range (High/Low). The scanner only has closing prices and approximates those inputs (see the note at the bottom). So treat the absolute values as indicative; the direction and the crossings remain usable.
Construction & calculation
- Raw Force Index = (today's close - yesterday's close) x volume.
- Smooth that with an EMA. Elder used the EMA(2) for the short term and the EMA(13) for the trend — the scanner uses the EMA(13).
Force(1) = (C(today) - C(yesterday)) x Volume
Force Index = EMA(Force(1), 13)
Interpretation
- Positive and rising: buyers have the upper hand and are gaining strength.
- A new price high with a lower Force Index = the rally is losing strength (divergence).
- Elder used the EMA(13) mainly as trend confirmation: as long as it is above zero, he stays long.
How the signal works in this scanner
Buy signal (green)The Force Index(13) crosses the zero line from below to above: the strength of the buyers structurally takes over.
Sell signal (red)The Force Index(13) crosses the zero line from above to below.
Watch-outs & pitfalls
- Multiplying by volume makes this indicator very sensitive to exceptional days (earnings, index reweighting).
- Elder always combined the Force Index with his Elder Ray and a trend filter — the three together formed his 'Triple Screen' system.