Force Index: price change multiplied by the volume behind it

What it measures

The Force Index multiplies the bar-to-bar price change by the bar’s volume. It combines three things a single indicator rarely does: which way price moved, how far, and how much trade was behind it.

Raw Force Index is extremely noisy, so it is always smoothed. The smoothing period is what determines whether you are looking at a short-term reading or a trend one.

Elder used a two-period version for entries and a thirteen-period version for trend.

The two versions answer different questions. The short one asks whether today had force behind it, which is an entry timing question; the long one asks whether the last few weeks did, which is a trend question. Reading either as the other is the usual mistake.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Take the current close minus the previous close.

2. 2

   Multiply by the current bar’s volume.

3. 3

   Apply an exponential average of the chosen period.

Settings

Thirteen periods is the trend setting and two is the entry setting; they are different tools rather than different tunings of one, and running both is the intended use. Anything in between inherits the weaknesses of each without the purpose of either.

How to read it

• The sign says which side had force behind it; the magnitude says how much.
• A short-period Force Index turning positive during an uptrend is a conventional pullback entry.
• A long-period Force Index diverging from price is the same distribution warning OBV gives, weighted by how far price actually moved.
• Spikes mark bars where a large move and large volume coincided, which are usually the bars that matter.
• A zero crossing on the short-period version happens constantly and means very little; on the long-period version it is a genuine change of control.

Where it misleads

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