Force Index is a Market Breadth Indicator. A Force Index combines price and volume into one value, attempting to measure the force behind a move in price. It can be read as an Oscillator or cumulatively.
The Elders Force Index fluctuates between positive and negative values. Crosses above and below the zero line can be read as change in market trend. Because of the volatility of the Force Index, using a moving average to smooth and fine-tune the signal can be helpful.
Alexander Elder, the indicators creator, believed that there are three components to a securities price movement. Those three components are.., direction, extent and volume. All these of three components are combined by the Elders Force Index to generate the Oscillator.
The formulae for Force Index is..,
Force Index = Volume * (Today’s price – Yesterdays Price).
In Technical analysis of securities trading, the stochastic oscillator is a momentum indicator that uses support and resistance levels. Dr. George Lane developed this indicator in the late 1950’s. The term stochastic refers to the point of a current price in relation to its price range over a period of time.
Dr. George Lane once said that the Stochastic Oscillator doesn’t follow price, it does not follow volume or anything like that. It follows the speed or the momentum of price. As a rule momentum changes direction before price. Because the stochastic Oscillator is range bound, it is also useful for identifying overbought and oversold levels.
%K = (Current Close – Lowest Low)/(Highest High-Lowest Low) * 100
%D = 3-day SMA of %K
Lowest Low = Lowest low for the look-back period
Highest High = Highest High for the look-back period