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
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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.
Money Flow Index (MFI)
The Money Flow Index is a volume-weighted RSI that measures buying and selling pressure by incorporating both price and volume data. It oscillates between 0 and 100, with readings above 80 considered overbought and below 20 considered oversold. Because it includes volume, MFI often provides earlier reversal signals than standard RSI, making it particularly effective for identifying exhaustion moves.
Anchored VWAP
Anchored VWAP (Volume-Weighted Average Price) allows traders to calculate the average price weighted by volume from any specific point in time, such as a major high, low, earnings event, or market open. Unlike the standard session VWAP that resets daily, anchored VWAP persists from the chosen anchor point, revealing the average cost basis of all participants who traded since that event and creating dynamic support and resistance levels.
Chaikin Money Flow
Chaikin Money Flow (CMF) measures the accumulation or distribution of an asset over a specified period by combining price and volume data. It oscillates between -1 and +1, with positive values indicating buying pressure and negative values indicating selling pressure. CMF differs from other volume indicators by incorporating both the close location within the bar and the volume, then averaging the result over a lookback period.