Force Index - Tendency Prediction In Forex
To play successfully on the exchange market, Forex has offered various indexes that show variations in rates and quotes, depending on different kinds of factors. Of course, a lot of indexes are very similar, as for the evaluation of market behaviour there is not a lot of data.
One of these indicators the Force Index is. Its calculation requires multiplying the volume by the modified moving average over some period.
The main difference from the rest of these indicators is the presence of zero line, the intersection of which is an important moment in the stock market trading. Observing the indicator will open positions in the direction to the intersection of this line.
Force Index - a numeric measure plainly displays a might of traders, bulls playing at rate growth and bears playing at rate fall. American Alexander Elder developed this index to let market players more clear, in numerical form, analyze the next trend upward or downward due to course correction.
It shows a positive or negative number, where there are collectively represented such essential stock figures, as the direction of price changes, differential of its oscillation and the size of trades on the market at some position. The size of the indicator is influenced by price raising or decrease, then the full amount of the rising or decrease, and the total amount of trades.
Force Index is generally applied to determine the advantageous time of closing and opening positions. It is wide known that the most advantageous moment to buy is the time when the force index is negative.And vice-versa - during the bear trend when the force index turns positive - it is better to sell.
Another important detail that can predict by the dynamics of Force index - if the price has changed, and the force index remained unchanged, is most likely the signal of the imminent reversal trend.
In all other cases, force index shows the might of bulls in moments of price rise and the might of bears in the moment of prise fall. That is to say, force index is predesignated to forecast how long the tendency will continue.
Force index is frequently used in combination with the short moving average, using 2 periods, or with long moving average (13 periods). In this situation, we can predict the change of the tendency.
Article Source: FxTradingStock.com
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Want to start trading on Forex? Step 1 - open a mini Forex account. Step 2 - start with small money to test the thing. Step 3 - enhance your trade skills so that your online Forex account becomes your source of income.
by: Dmitry Vasenyov
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Word Count: 404
Date: Wed, 19 Jan 2011
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