The Force Index indicator tries to estimate the strength of price movements and allows us to make decisions in the direction of buying and selling by examining trend views and particularly probable reversal views.
The indicator, created by Alexander Elder, uses a simple 13-period moving average. While there is a positive expectation regarding the related asset above level zero, a negative appearance expectation regarding the movement below level zero might be on the agenda.
Since it has the Oscillator characteristic, the Divergence appearance meaning the inconsistency between the price and the indicator might get attention in some periods. This is why, like all the indicators, the Force Index indicator should also not be used alone.Its use with the volume indicator may allow more successful interpretation.
In order to access the Force Index indicator from the MetaTrader platform, you can respectively click on the tabs of ToolBar, Insert, Indicator, then choose Oscillator.
The Positive or Negative Expectation Condition of the Force Index Indicator!
While making trade decisions regarding the financial assets, in the Forex Index indicator, below level zero might be interpreted as negative, and above level zero might be interpreted as positive. If the simple 13-period moving average goes below level zero, the negative expectation regarding the asset comes into prominence. If the simple 13-period moving average goes above level zero, you can see with the reaction in the DOWN and UP areas the expectation regarding the asset is explained as positive.
Moreover, the areas where the moving average in the Force Index indicator peaks or hits the bottom is a process to be followed for a possible return for the asset price. For the expectations regarding whether the current return will gain confirmation or not, the level zero might be accepted as the reference.
Force Index – Divergence!
In the Oscillator indicators that allow us to see the overbought and oversold zones, in some periods, there is inconsistency regarding the asset price.
The concept elaborated as divergence is regarded as Positive or Negative incompatibility. In brief, it is the situation of the price and the indicator creating opposite expectations. The related inconsistency removes the buy-sell signal until the price and indicator are consistent with each other.
If Oscillator indicators that allow us to see the overbought and oversold zones are used on their own, the times of inconsistency will affect the trade performance negatively. This is why indicators shouldn’t be used alone.