Force index (FI) is used to measure the force of bears and bulls in a trending market. This indicator is based on price, direction and trade volumes. FI may be smoothed by a short-term (2-10 periods) or long-term (13 periods) MA.
How to interpret:
If the current closing price is higher than the previous one, the index will be positive. When the indicator rises, it shows bulls’ force. Vice versa, if the closing price is lower than the previous one, the indicator will be negative showing the bears’ force.
If a trend is strong, the force index will change sharply. More likely, it will signal the continuation of a trend. At the same time, if prices change by inertia, the FI will change only slightly.
If the current price increases but the indicator is not, it means that the uptrend weakens.
- Force index is printing new highs in a rising trend (trend continuation).
- Forces become negative (fall below zero) in the period of a rising trend (buy on dips).
- Force index rises above zero in a downtrend.
- Force index crosses the MA to the upside.
- Divergences (price prints lower lows when FI makes higher lows).
- Force index is printing new lows in a downward trend (trend continuation).
- Forces become positive (rise above zero) in the period of a downward trend (sell on pullbacks).
- Force index drops below zero in a rising trend.
- Force index crosses the MA top down.
- Divergences (price prints higher highs when FI makes lower highs).
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