May the force be with you. But we will not do any mind tricks to the market, only measure the momentum of the price. This indicator was made by Alexander Elder who also wrote a book called Trading for a living which is recommended for a new guy. This indicator is actually an oscillator which is trending in a boundary over and also under zero. It is using movement of price and volume to determine momentum in the current market you are trading in. Alexander who invented this indicator believes that three things are important for specific asset movement, which are: direction of the asset, volume of trading and extent. Now, this indicator is measuring this power with which as we said you can determine trend and also reversals.
WHAT YOU WILL LEARN HERE:
- What is force indicator?
- Download force indicator
- How to use it?
- Why is it bad and why good?
HOW DOES FORCE INDICATOR WORKS?
Ok, so let us take a closer look at how does this work. It is actually simple to use. First thing you need to do is to get closing price of specific asset from day before and substract it from current one. With this, you get direction and also extent. When you get the number, you have to multiply it with the volume to get F1. Nex thing we have to make oscillator plots that will be moving average of results. Alexander is suggesting to start with 13 exponential moving averages. When you will get familiar with the indicator, you can adjust it for yourself. When you have days that have small movements and small volume means that the force is weak. When you have days with big movements and high volume,means you have strong force. You can see the force is showing on onscillator this way:
WHY IS IT BAD AND WHY GOOD?
To be honest it just needs some time for a new trader to get used to it, otherwise it is not bad at all. Of course it is not 100% and can happen it can fake it, so you can make sure of that. Beside that, it uses good information for displaying indicator from which you can get signals for trading. You can use it reliably as trend support and it is good to check with multiple time frames. It is also good if you want to determine the top.
It is overally a great tool which is great for a beginner to start with and learn for future. Indicator can also provide you insight on volatility of certain asset. You can add it also to your current strategy as momentum oscillator. Just remember when your chosen asset is quiet and lazy the line will be flat and when the asset will be high in volume or daily range then you will see that also in force index.