Elder Force Index
Combines price direction, magnitude, and volume to measure the force behind each price move.
Overview
The Force Index was developed by Dr. Alexander Elder and introduced in his 1993 book "Trading for a Living." It is one of the few indicators that combines both price change and volume into a single value. The idea is that a large price move on heavy volume represents a more powerful market force than the same move on light volume. Positive Force Index means bulls are in control; negative means bears dominate.
How it looks on a chart
Illustration only — synthetic data generated for visual reference.
The Force Index answers the question: how much power is behind today's price move? If the price went up 2 points and 10 million shares traded, that is more forceful than if price went up 2 points with only 1 million shares. Volume confirms the quality of the move. The raw Force Index oscillates above and below zero. Above zero means buyers had more force; below zero means sellers had more force. In practice, traders smooth the Force Index with a short EMA (2-period) for sensitive signals, or a longer EMA (13-period) for trend confirmation. A 2-period EFI crossing below zero in an uptrend signals a pullback — a potential buying opportunity. When the 2-period EFI makes a new high while price also makes a new high, the trend is healthy. If price makes a new high but the Force Index doesn't, that divergence warns the move lacks conviction.
The raw Force Index formula is: Force(t) = (Close(t) − Close(t-1)) × Volume(t). This generates a volatile series, so two smoothed versions are commonly used: EFI(2) for short-term reversals and EFI(13) for intermediate trend analysis. Dr. Elder recommended using EFI(2) for entries and EFI(13) for trend confirmation. A practical strategy: When EFI(13) is positive (bulls in control), only look for long setups. When EFI(13) is negative, only short setups. Use EFI(2) to time the entry: go long when EFI(2) turns negative (pullback in uptrend) and the next day turns positive again. This pullback entry within a trend confirmed by EFI(13) is Elder's core Triple Screen method component. The Force Index naturally normalizes somewhat across assets because it is denominated in price × volume (a monetary flow concept). However, comparing absolute Force Index values between different assets or time periods is still problematic without normalization. Dividing by a rolling average of absolute force values creates a normalized version useful for cross-asset ranking.
The Force Index is structurally similar to volume-weighted momentum but without the complexity of full VWAP-based indicators. Its price-change × volume construction gives it properties related to the market microstructure concept of "order flow" — the net signed volume-weighted price impact. In limit order book models, upward force correlates with the depletion of limit sell orders. From a systematic strategy perspective, the Force Index has been validated as a short-term momentum predictor in several academic studies on high-frequency data (Grinblatt & Titman 1989 on momentum, augmented by volume). However, the raw Force Index is highly serially correlated with volume, making it challenging to isolate the incremental information from price change alone. One sophisticated application is using the Force Index as a component in a composite "buying/selling pressure" model alongside OBV and accumulation/distribution. Ranking assets by their Force Index z-score over a 20-day rolling window provides a cross-sectional momentum signal that can be incorporated into long-short equity factor models.
Formula
Force Index(t) = (Close(t) − Close(t−1)) × Volume(t) EFI(n) = EMA(Force Index, n)
- 1.Calculate daily price change: Close(t) − Close(t−1).
- 2.Multiply by today's volume: Force Index(t) = Price Change × Volume.
- 3.For EFI(2): apply a 2-period EMA to the Force Index series for sensitive signals.
- 4.For EFI(13): apply a 13-period EMA for trend confirmation.
- 5.Plot both versions; positive values indicate bullish force, negative indicate bearish force.
Parameters
| Parameter | Default | Range | Description |
|---|---|---|---|
| Short EMA Period | 2 | 1–10 | Short-term EFI for entry timing signals. |
| Long EMA Period | 13 | 5–30 | Long-term EFI for trend direction confirmation. |
Trading signals
bullish: EFI(2) dips below zero in an uptrend (EFI(13) positive)
Pullback in uptrend — potential buying opportunity within larger trend.
bullish: EFI(13) crosses from negative to positive
Intermediate trend shifting to bullish — increase long exposure.
bearish: EFI(2) spikes above zero in a downtrend (EFI(13) negative)
Rally in downtrend — potential short entry within larger trend.
bearish: Price makes new high but EFI(13) does not
Divergence — buying force weakening at new highs, reversal risk rising.
Limitations
- •Requires accurate volume data — unreliable for OTC markets, spot forex, or assets with inconsistent volume reporting.
- •Absolute values are difficult to compare across assets or time periods without normalization.
- •Highly volatile in raw form — smoothing is mandatory but introduces lag.
- •Less useful for assets where volume is thin or dominated by institutional block trades.
Gilito incorporates the Force Index as part of its volume-weighted momentum signal suite, testing both EFI(2) as a pullback entry trigger and EFI(13) as a trend regime filter. It is benchmarked against OBV and Money Flow Index on each asset to determine which volume-price momentum metric has the highest predictive validity.