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Developed by Dr Alexander Elder, the Force Index is a standard indicator in most trading platforms. Its calculation is based on momentum and Volume, to measure the force behind market movements. It is useful in identifying divergences and generating buy\sell signals.

By using both price-action and Volume, this indicator can give traders insight over market strength that is not presented in the charts alone. Combination of volume can show prudent traders divergences of price and trends that are lacking fuel (Volume) and are prone to reversal. The use of Volume in this indicator gives it predicting power that is not available in price-based indicators.

 Absolutely NO THINKING is needed, just buy when Blue and sell when Red!

Calculation of the Force Index
Calculation of the Force Index is rather simple:
Force Index = (Close of Today - Close of Yesterday) * Volume

Smoothing the Force Index is advised, as its raw values are quite choppy and result in many false trading signals. Smoothing is done via an Exponential Moving Average that is calculated over the Force Index.

Interpretation of the Force Index
The Force Index shows us the strength of market movements in relation to price and volume. Positive values indicate bull strength while negative values indicate bear strength. The more extreme the value, the stronger the market movement is.

Trading with Force Index
The Force Index can be used in trading in several methods:

Trading Method #1: Zero-Line Cross
This trading method uses the zero-line as reference point for determining trend direction. It is a trend-following approach, and signal are generated when the smoothed Force Index crosses the zero line. A cross from below indicates a Buy signal and a cross from above indicates a Short signal.

Trading Method #2: Trend-Line Break
An advanced trading method whose basis is interpreting the visual action of the Force Index, to generating trading decisions. Trading signals are generated when trendline on the Force Index is broken.

Trading Method #3: Strong Momentum Trading
These trades attempt to catch periods of strong market momentum, to make quick profits by joining the trend. When the Force Index is at an extreme value, a market is at a strong movement. Trader then enters to make quick profits and ride the trend.