Force Index (Elder): Power Behind Each Price Move

Key Takeaways

• Force Index equals (close minus previous close) multiplied by volume, then usually smoothed by an EMA.
• Elder uses a 2-period EMA for short-term entries and a 13-period EMA for trend confirmation.
• Positive readings show buyers in control, negative readings show sellers in control, with zero as the dividing line.
• Reading raw Force Index without smoothing creates a noisy series that is hard to interpret consistently.

What It Is

The Force Index, often shortened to EFI, is a volume oscillator that swings above and below zero. Elder designed it to combine the three pieces of evidence he considered essential to any price bar: direction, extent of the change, and the volume behind it.

The raw Force Index is calculated bar by bar, but in practice traders almost always smooth it. The two standard smoothings are a 2-period EMA for short-term timing and a 13-period EMA for trend confirmation. Both are documented in Elder's writings and supported by every major charting platform.

The Intuition

A 1 percent move on heavy volume is a different event than a 1 percent move on quiet volume. The first reflects committed money. The second can be drift in a thin tape.

Force Index gives you a single number that respects both. Multiplying price change by volume rewards days where many shares moved decisively and punishes drifts on light volume. The sign tells you who won the bar, and the magnitude tells you how convincingly.

How It Works

The raw formula is straightforward:

Force Index (raw) = (Close - Previous Close) * Volume

This value is then smoothed:

Force Index (2)  = EMA(Force Index raw, 2)
Force Index (13) = EMA(Force Index raw, 13)

The short version, Force Index (2), is sensitive to pullbacks. Elder treats deep dips below zero on the 2-period EMA as buying opportunities during an established uptrend, and spikes above zero as selling opportunities during a downtrend.

The 13-period EMA is the trend filter. When Force Index (13) is above zero and rising, bulls are in command. When it is below zero and falling, bears are in command. Crossings of the zero line, combined with divergences against price, supply the medium-term signals.

Worked Example

Imagine a stock closes today at 102.40, the prior close was 101.20, and today's volume is 4.0 million shares.

Force Index (raw) = (102.40 - 101.20) * 4,000,000 = +4,800,000

If the prior raw value was +3.0M and yesterday's 2-period EMA was +3.6M, the new 2-period EMA is roughly +4.4M, reflecting strong demand. If the longer 13-period EMA continues climbing through zero, that confirms a developing uptrend.

Now suppose the next day the stock prints a higher high but closes nearly flat on 6.0M shares, producing a raw Force Index of about +0.6M. Price made progress but the force behind it collapsed. A trader watching for divergence flags this as a warning that the trend is losing strength.

Common Mistakes

1. Trading the raw Force Index. The unsmoothed series whips around. Elder always smoothed it; you should too.
2. Mixing the two EMAs as if they were equivalents. Force Index (2) is a short-term timing tool. Force Index (13) is a trend filter. They answer different questions.
3. Ignoring volume quality. On stocks with one-off block prints or earnings volume spikes, EFI can mislead because the underlying volume series is not stationary.
4. Reading absolute values across stocks. The scale depends on share volume, so a +10 million reading on AAPL is not comparable to +10 million on a thin small cap.
5. Skipping divergence checks. Price highs without confirming Force Index highs are exactly the setup Elder built the indicator to catch. Missing them defeats the point.

Frequently Asked Questions

What is the Elder force index in simple terms? The Elder force index multiplies the change in close by the volume on that bar, producing a single number that shows whether buyers or sellers had more power.

How does the Elder force index affect investment decisions? Traders use Force Index (13) above zero as confirmation of an uptrend and Force Index (2) dipping below zero in that uptrend as a pullback entry. Reversed rules apply in downtrends.

What is a real-world example of the Elder force index? On a daily SPY chart during a rally, Force Index (13) stays above zero while Force Index (2) makes shallow dips. Each dip below zero on the short version offers an entry while the longer filter remains bullish.

How can investors use the Elder force index effectively? Always smooth it, anchor decisions to the 13-period trend reading, and demand divergence at swing extremes. Treat single-bar spikes from earnings or block trades with skepticism.

How is the Elder force index different from On Balance Volume? OBV adds or subtracts the entire bar's volume based on close direction with no size weighting. Force Index scales volume by the actual price change, so a small move on heavy volume reads weaker than a big move on the same volume.

Sources

1. StockCharts ChartSchool, Force Index. https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/force-index
2. Elder, A. (1993). Trading for a Living. John Wiley and Sons. https://www.wiley.com/en-us/Trading+for+a+Living%3A+Psychology%2C+Trading+Tactics%2C+Money+Management-p-9780471592242
3. TradingView Solutions, Elder's Force Index (EFI). https://www.tradingview.com/support/solutions/43000502259-elder-s-force-index-efi/
4. Incredible Charts, Force Index Indicator. https://www.incrediblecharts.com/indicators/force_index.php

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.