Elder's Force Index
Overview
Elder's Force Index, developed by Dr Alexander Elder, measures the force behind price movements by combining three essential elements: direction of price change, magnitude of that change, and volume. The raw force index is smoothed with an exponential moving average to create a practical oscillator that identifies trend strength, potential reversals, and the best pullback entries during an established trend.
Key Concepts
The raw force index equals the price change multiplied by volume for each period. A two-period EMA of the force index highlights short-term turning points for entry timing. A thirteen-period EMA of the force index identifies the intermediate trend direction. Positive force index values indicate buyers are in control; negative values indicate seller dominance. Divergence between the force index and price reveals weakening momentum. Spikes in the force index indicate climactic volume events that often precede reversals.
Entry Signals
Enter long when the thirteen-period force index is positive (uptrend) and the two-period force index dips below zero (pullback). Enter short when the thirteen-period force index is negative (downtrend) and the two-period force index rises above zero (pullback). Divergence: price making new highs with a declining force index suggests the rally is weakening. Enter after a force index spike and reversal at a key support or resistance level.
Exit Signals
Exit long positions when the thirteen-period force index turns negative, signalling a trend change. Exit short positions when the thirteen-period force index turns positive. Use the two-period force index crossback through zero as a short-term exit signal. Close positions when a climactic force index spike indicates exhaustion.
Best Timeframes
Daily, Weekly
Pro Tips
The force index is most effective as part of Elder's Triple Screen trading system, where it serves as an entry timer on the intermediate timeframe. Its strength lies in combining direction, magnitude, and volume into a single indicator, providing a more complete measure of market conviction than price-only oscillators. Use the two-period version for entry timing and the thirteen-period version for trend identification.
More Topics in This Category
On-Balance Volume (OBV)
On-Balance Volume is a cumulative volume indicator that adds volume on up days and subtracts it on down days, creating a running total that reveals whether volume is flowing into or out of an asset. Developed by Joe Granville, OBV often leads price — a rising OBV during a consolidation suggests accumulation, while a falling OBV during a hold signals distribution. The direction of OBV matters more than its absolute value.
Volume Spread Analysis (VSA)
Volume Spread Analysis examines the relationship between price spread (the range of a candle), closing position within that spread, and the accompanying volume to determine the intentions of institutional market participants. Developed from the work of Richard Wyckoff and refined by Tom Williams, VSA identifies accumulation, distribution, and supply/demand imbalances by reading the story that volume and price action tell together.
VWAP Strategies
Volume Weighted Average Price (VWAP) represents the average price an asset has traded at throughout the session, weighted by volume. It serves as a dynamic intraday fair-value benchmark used by institutional traders to gauge execution quality. For retail traders, VWAP acts as a powerful support/resistance level and trend filter — price above VWAP suggests bullish intraday bias, while price below suggests bearish bias.
Accumulation/Distribution Line
The Accumulation/Distribution Line measures the cumulative flow of money into and out of an asset by examining where price closes within its range relative to volume. Unlike OBV, which only considers whether the close is up or down, the A/D Line weights volume by the close's position within the bar's range, giving a more nuanced picture of buying and selling pressure.