In a simple word, the Elder Force Index indicator tells you, the force behind the Bullish and bearish trend. Also how strong the trend is.
Trend strength determined the force of the price and Volume. The strength if depending on either price or Volume.
Elder Force Index Setting
What Elder Force Index Indicator Tells You
This indicator tells you, direction of the price, Changes of price & Volume.
- When the Indicator calculates value is negative this shows a bearish trend. When the indicator calculated value is positive this shows Bullish trend.
- The indicator movement tells you price activities.
- It also indicates volume changes. The large volume can change indicator calculated value.
This indicator set Centerline as a zero. And moving upward and downward. When indicator line above the zero line, this is bullish side & below zero line is bearish side. If indicator moving down to zero line this means Flat price trend.
It’s tells you, buying and selling signals while crossing zero line.
Calculation
Elder Force Index calculation is = (Current Period Closing price –Previous Period Closing price) * Current Period volume.
So this indicator is base on, the current closing and the previous closing, also depending on current period volume.
If the current closing price is greater than the previous closing price then indicator value will be positive. This is the bullish signal.
If the previous price is greater than the closing price the indicator value will be negative. This is the bearish signal.
- Period: By default value is 13. The indicator line will move base on 13 period calculated values.
- Result: line color of this indicator.
Elder Force Index Indicator Trading Strategy
- As we know above zero line is a bullish side. So,, if indicator line going upward after bottom out, after crossing zero line. this is the buying signal.
- Similarly, when the indicator line moving to a downward direction after touching the peak. if indicator crossing zero line and moving down this is the selling signal.
- when indicator value comes to 0 which Means the stock trend is flat. In this situation you can exit.
- You can use this indicator with a Combination of RSI indicators. The strategy is when EFI indicator crossing zero line & also RSI indicator is above 50 line, & both are moving upward direction this the buying signal. When EFI gives a signal to sell so that you can confirm sell signal in the RSI indicator. Below 50 line of RSI is sell signal.
Conclusion
The elder force index tells you the force or power behind the Market rising or falling. Using this indicator this gives you buy and sell signal. Also exit signal. Using a combination of other indicators helps to reduce the noise of this indicator. For more accurate trade.
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