Force Index In Forex

To work effectively on the stock market, Forex has proposed several indicators that display changes in rates and quotes, hanging on different factors. Certainly, many indicators are very alike, as for the analysis of market development there is not much information.

Force Index represents one kind of such indexes. For its calculation the volume should be multiplied by the modified moving average over a given period.

The main peculiarity of this indicator is the existence of zero line and the intersection of it is an important moment in the exchange market trading. While supervising the indicator it`s recommended to open positions in the direction to the intersection of this line.

Force Index – a numeral value clearly represents a force of traders, bulls playing at higher rates and bears playing when it becomes lower. This indicator was worked out by American Alexander Elder to market players so that they could more clearly, in numerical form, analyze the next trend upward or downward taking into account course correction.

It presents a positive or negative value, where such important stock information, as the direction of price behaviour, difference of its fluctuation and the size of transactions on the market at a given position are collectively represented there. The dimension of the indicator depends on price rise or fall, after the absolute amount of the rise or fall, and the total volume of transactions.

Force Index is normally used to find the correct time to close and open positions. It is generally accepted that the most opportune moment to buy is the time during bull trend when the force index is negative. And conversely – during the bear trend when the force index turns positive – it is better to sell.

One more essential component that can forecast by the dynamics (or rather, the lack of it) of Force Index – if the price has changed, and the force index remained unchanged, is likely the signal of the oncoming reversal trend.

In all other cases, force index displays the strength of bulls during periods when price increases and the strength of bears in the period of its decrease. In other words, force index is intended to prognosticate continuance of the tendency.

Force index is often practiced in conjunction with the short moving average, using 2 periods, or with long moving average (13 periods). In this instance, we can anticipate the change of the tendency.

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