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Understanding the Force Index (FRC) for Better Trading Decisions

Mike • 2005-12-17 01:53
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Hey fellow traders! Today, let’s dive into the Force Index (FRC) indicator, a fantastic tool that measures the power of bulls and bears in the market.

The Force Index connects the dots between price trends, reversals, and trading volumes. While you can use it on its own, combining it with a Moving Average can really enhance your trading strategy. Using a short moving average (like a 2-period MA) helps pinpoint ideal moments to enter and exit trades. On the other hand, a longer moving average (such as a 13-period MA) reveals broader trends and shifts.

  • Consider buying when the Force Index dips below zero during a bullish trend;

  • The indicator signals a continuation of the upward trend when it reaches a new peak;

  • Look for a sell signal when the index turns positive during a bearish trend;

  • The Force Index indicates bearish strength and trend continuation when it drops to a new low;

  • If price changes don't align with volume shifts, the Force Index will stabilize, hinting that a trend reversal might be on the horizon.

How to Calculate the Force Index

The strength of market movements is defined by their direction, magnitude, and volume. If the closing price of the current bar exceeds the previous bar's closing price, the force is positive. Conversely, if it’s lower, the force is negative. The larger the price difference, the greater the force. Similarly, higher transaction volumes amplify the force.

FORCE INDEX (i) = VOLUME (i) * ((MA (ApPRICE, N, i) - MA (ApPRICE, N, i-1))

where:

  • FORCE INDEX (i) — The Force Index of the current bar;
  • VOLUME (i) — Volume of the current bar;
  • MA (ApPRICE, N, i) — Moving Average of the current bar for N periods: Simple, Exponential, Weighted, or Smoothed;
  • ApPRICE — The applied price;
  • N — The smoothing period;
  • MA (ApPRICE, N, i-1) — Moving Average of the previous bar.

Force Index (FRC) indicator MetaTrader4

For a more in-depth look at the Force Index, check out the Technical analysis: Force Index.

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