FORCE INDEX SETUP
The Force Index, created by Alexander Elder is an oscillator, that attempts to measure the force of bulls during uptrends and the force of bears in downtrends. It takes into account price and volume.
- A positive close of prices will print a positive force, a negative close of prices will print a negative force;
- The greater the volume, the greater the force;- The greater the price change, the greater the force.The rule for its construction is: Force Index = Volume * (close-close of the previous day). The Short-Term Force Index is normally smoothed with a 2-day exponential moving average.A 13-day exponential moving average of the Force Index helps tracking longer term changes in the force.The 2-day exponential moving average of the Force Index are used to pinpoint buying and selling opportunities.You will spot an entry point when the 13-day exponential moving average (trend) is positive and the 2-day exponential moving average (setup)of the Force Index is negative, placing a buy order above the high of that day. The opposite is true during downtrends.