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Force Index FRC 

 

Force Index FRC Purpose


Force Index (FRC) technical indicator is invented by Alexander Elder and measures the bulls’ power during every rise and the bearish power during every fall. It attaches the main essentials of the market information: price trend, its drops’ levels and transactions’ volumes.
The power of market trends is determined by price and volume:

  • Market prices increase in bull markets and decrease in bear markets
  • Fast price changes and high volumes show a strong trend
  • Slow price changes and low volumes show a weak trend

FRC indicator is simple and shows the difference between the current and previous interval prices, multiplied by the current volume:

  • Positive FI = price rises
  • Negative FI = price falls
  • Large price changes and large volumes give large FI values

This indicator may be used separately, however, it is better to smooth it with the help of the moving average.

  • A 2 period moving average is used to open and close trade positions
  • A 13 period moving average is used to recognize trends and reversals



Force Index FRC Usage


Force Index allows identifying the strengthening of different time scale trends:

  • FI indicator should be made more perceptive by decreasing its period for short trends.
  • FI indicator should be smoothed by increasing its period for longer trends.

Force Indexmay strongly involve a tendency change:

  • Break-down of an uptrend when the FI indicator's value is changing from positive to negative and price and indicator show divergence.
  • Break-down of a downtrend when the FI indicator's value is changing from negative to positive and price and indicator show convergence.

Force Index can help make out the trend corrections with a trend-following indicator:

  • An uptrend correction when the indicator bounces off the low.
  • A downtrend improvement when the indicator slides from a pike.




Force Index FRC Calculation


The power of every market progress is distinguished by its direction, scale and volume.


FI = ( MA( MATYPE, ApPrice, N, J ) – MA( MATYPE, ApPrice, N, J -1 ) ) * VOLUME( J )


Where:


MA- moving average
MATYPE - type of moving average (simple, exponential, smoothed or weighted)
ApPrice - applied price (open, close, high, low, median, typical or weighted)
N -number of intervals used for the moving average
J -current interval

 

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