The Force Index(FI), developed by Alexander Elder, is a technical indicator that combines price movements and trading volume to measure the strength behind price trends. It consists of three key components:

Direction of Price Change – The Force Index calculates the difference between the current and previous closing prices. A positive value indicates upward momentum, while a negative value suggests downward pressure.

Magnitude of Price Change – The extent of the price movement is factored in, emphasizing stronger trends. Larger price changes contribute more significantly to the Force Index value.

Trading Volume – Volume acts as a multiplier, reinforcing the significance of price movements. Higher volume during a price change strengthens the Force Index, confirming the trend’s validity.

The Force Index can be used as a single-period value (raw Force Index) or smoothed with a moving average (commonly a 13-period EMA) to filter out noise. Traders use it to identify bullish/bearish divergences, trend reversals, and breakouts by analyzing the interplay between price and volume.