Force Index Indicator: Combining Price and Volume
The Logic of Force: What is the Force Index?
Developed by Dr. Alexander Elder, the Force Index is a technical indicator that measures the 'Power' of bulls and bears. It is calculated by multiplying the percentage change in price by the corresponding volume. This formula captures whether a price move is a structural trend or just a low-volume fluctuation.
Most momentum oscillators ignore volume entirely. The Force Index is designed to reveal when a move has the genuine backing of the institutional 'weight'—and more importantly, when it lacks it.
The Formula: Volume x (Close - Previous Close)
The raw Force Index is very noisy. To make it tradable, Dr. Elder recommends smoothing it with an Exponential Moving Average (EMA).
- 2-period EMA: Used for very short-term 'Timing' entries. It identifies extreme overbought/oversold conditions in a single session.
- 13-period EMA: The industry-standard for trend confirmation and identifying divergence. This smoothing helps filter out 'Noise' while highlighting structural momentum changes.
Force Index Entry Checklist
Base Setting: 13-period EMA of Force Index
Entry: Sell if price hits high and Force Index is falling
Entry: Buy if price hits low and Force Index is rising
Bullish: Force Index > 0 for trend confirmation
Bearish: Force Index < 0 for trend confirmation
Target: Reach the next major Support/Resistance
Strategy: Spotting the 'Thin' Breakout
The Breakout Filter: In a structural trend, the 13-period EMA of the Force Index should be strongly above or below its zero-line. If the price breaks a new high but the Force Index is falling or staying near zero, it indicates a 'Thin' move. This is a common trap where retail traders are buying the peak while institutional volume is already withdrawing. Trend Rejection: If the Force Index pulls back to the zero-line during a strong trend and then 'Rejects' it (bounces), it’s a high-probability continuation signal.
Divergence: The Ultimate Reversal Signal
The most powerful Force Index signal is Hidden Divergence. If the market reaches a Higher High but the Force Index makes a Lower High, it's a structural warning. It proves that despite the price being literally higher, there is less volume energy supporting the rally than there was at the previous peak. This almost always leads to a sharp reversal or correction.