Elder's force index(EFI)

Elder's force index indicator was created by Alexander Elder.

Elder's force index is an indicator that is used to measure the power of bull or bear movement based on price and volume.

Elder's force index price movement is based on three key components,namely;

-Direction      - Extent          - Volume

Elder's force index is an oscillator and therefore has an oscillation at point 0.

Elder's force index is based on centerline and divergence.

Elder's force index is therefore calculated using the following formula;


Elder's force index= (Today's close - yesterday's close)* today's volume.

Based on centerline,it therefore follows that when the Elder's force index rises above 0,that will be an indication of an upward trend market thus the traders should be trading upwards while when the elder's force index falls below 0 that will be an indication of a downward trend market thus the trader should be trading downwards.
Also,based on divergence it therefore follows that when the price is moving upwards while the elder's force index is moving downwards,the price will reverse and start moving in the same direction downwards as the elder's force index.On the other hand,when the price is moving downwards while the elder's force index is moving upwards,the price will reverse and start moving in the same direction upwards as the elder's force index.This is indicated as in the candle sticks chart below;



From the candle sticks chart above,there are 3 points,point A,B and C.Point A and B represent divergent points while point C represents the elder's force index.
At point A,the market price is moving upwards while the elder's force index is moving downwards.This results to a reversal of the market price downwards in the same direction as the elder's force index.This will signal the trader to be trading downwards.
On the other hand,at point B,the market price is moving downwards while the elder's force index is moving upwards.This will results to a reversal of the market price upwards in the same direction as the elder's force index.This will signal the trader to be trading upwards.

Recommendation:If you are a day  trader,just use 1 min,5 min,15 min and 30 min timeframe while if
you are a swing trader just use 1 hour and above timeframe if you want elder's force index to work well for you


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