Tuesday, September 19, 2006
Technical Indicators
Force Index
Read More...Developed by Dr. Alexander Elder, the Force Index combines price movements and volume to measure the market. Unmodified Force Index results can be rather erratic, better results are achieved by smoothing with an moving average. A 2-day exponential moving average of the Force Index may be used to track the strength of buyers and sellers in the short term while a 13-day exponential moving average better measures the strength of intermediate cycles.
If the Force Index is above zero Elder would say, "the bulls are in control." A negative Force Index would then signal that "the bears are in control." If the Index remains close to zero neither side has control and no strong trends exist.
The greater the distance from zero, the stronger the signal. If the Force Index flattens out it indicates that either volumes are falling or large volumes have failed to significantly move prices. Either situation is likely to precede a reversal.
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If the Force Index is above zero Elder would say, "the bulls are in control." A negative Force Index would then signal that "the bears are in control." If the Index remains close to zero neither side has control and no strong trends exist.
The greater the distance from zero, the stronger the signal. If the Force Index flattens out it indicates that either volumes are falling or large volumes have failed to significantly move prices. Either situation is likely to precede a reversal.
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