The Force Index was developed by Alexander Elder and is often considered a next generation technical indicator. Technical analysts use this indicator in order to measure the strength or force, behind a move in price action. The Force Index gives technical analysts information on the directional change of the price, the degree of the change and the trading volume. The inclusion of volume as part of the oscillator creates a powerful tool as volume confirms moves in price action.
The center line is set at 0 and a reading above 0 suggests that bulls are in control of price action while a reading below 0 places bears in control. The volume confirmation behind moves doesn’t only confirm breakout/breakouts, but also allows technical analysts to filter out false, short-term moves within a bigger trend. This creates more accurate trading signals when the Force Index is used together with other aspects of technical analysis.
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