Force Index In Forex
To work effectively on the stock market, Forex has proposed several indicators that display changes in rates and quotes, hanging on different factors. Certainly, many indicators are very alike, as for the analysis of market development there is not much information.
Force index is one of such indicators. For its calculation it`s necessary to multiply the volume by the modified moving average over a given period.
The main difference from the rest of these indicators is the presence of zero line, the intersection of which is an important moment in the stock market trading. In observing the indicator is to open positions in the direction to the intersection of this line.
Force Index – a numeral value clearly represents a force of traders, bulls playing at higher rates and bears playing when it becomes lower. This indicator was worked out by American Alexander Elder to market players could more clearly, in numerical form, analyze the next trend upward or downward taking into account course correction.
The indicator comprises a positive or negative numeric, where there are collectively represented such significant stock measures, as the course of price movement, changes of its variation and the size of deals on the market at a given position. The size of the indicator is influenced by raising or lowering prices, then the absolute amount of increase or decrease, and the total volume of deals.
Force Index is normally used to find the correct time to close and open positions. It is generally accepted that the most opportune moment to buy is the time during bull trend the force index is negative. And conversely – during the bear trend the force index turned positive – better to sell.
Another important detail that can predict by the dynamics of Force index – if the price has changed, and the force index remained unchanged, it is most likely the signal of the imminent reversal trend.
In all other cases, force index indicates the power of bulls in the time of price advance and the power of bears in the time of its decline. Said differently, force index is destined to predict the tendency duration.
Force index is frequently used in combination with the short moving average, using 2 periods, or with long moving average (13 periods). In this situation, we can predict the change of the tendency.
Before you choose to open your own online Forex account, please make sure that you find as much info about this company and the service of opening Forex accounts in general. Sometimes a good choice is also to open a mini Forex account and do some test trades with minimal investments. Read more info about mini Forex account, its features and benefits, advantages – here.