The Elder’s Force Index & EMA Strategy is a momentum-based trading technique that combines Alexander Elder’s Force Index with Exponential Moving Averages (EMAs) to identify trend strength, entry confirmation, and potential reversals. This hybrid strategy offers traders a powerful way to align price movement, volume, and momentum for higher-probability trades.

Ideal for traders in forex, stocks, crypto, and commodities, it works best in trending markets, and can be used for intraday, swing, or position trading.

What Is Elder’s Force Index (EFI)?

The Force Index was developed by Dr. Alexander Elder and measures bullish or bearish power behind a price move using:

• Price change (momentum)
• Volume (strength)

Formula: EFI = (Close Today − Close Yesterday) × Volume

Key characteristics:

• Positive EFI = buying pressure
• Negative EFI = selling pressure
• Can be smoothed using an EMA (commonly 13-period) for clarity
• Works best when used with trend filters like EMAs

Why Combine EFI with EMA?

The EMA provides a trend filter, while EFI adds momentum and volume confirmation. Together, they:

• Filter out false signals in choppy markets
• Confirm trend strength before entry
• Identify high-quality pullback or breakout trades
• Help spot divergences between price and momentum

How to Trade the Elder’s Force Index & EMA Strategy

1. Apply the Indicators

• 13-period EMA (can also test 20 or 21)
• 13-period Force Index (smoothed using an EMA on EFI)
  Optional: Add a longer EMA (e.g. 50 or 200) for trend context

2. Identify the Trend With EMA

• Price above EMA → uptrend
• Price below EMA → downtrend
  This is your trend filter

3. Confirm Momentum With Force Index
In an uptrend:

• Look for pullbacks where EFI goes negative, then turns back positive
• Buy when EFI crosses above 0 or shows a strong spike upward

In a downtrend:

• Look for retracements where EFI turns briefly positive, then drops
• Sell when EFI drops back below 0

4. Spot Divergences for Reversals

• Bearish divergence: Price makes higher highs but EFI makes lower highs
• Bullish divergence: Price makes lower lows but EFI makes higher lows
  These signal potential reversal opportunities

5. Entry and Exit Rules

Entry (Buy):

• Price above EMA
• EFI dips below zero, then spikes above with bullish candle
• Optional: Enter on candle close above EMA or breakout level

Entry (Sell):

• Price below EMA
• EFI turns positive, then drops sharply below zero
• Confirm with bearish candlestick pattern

Stop-loss:

• Below swing low (for longs) or above swing high (for shorts)
• Alternatively, use ATR to calculate volatility-based stop

Target:

• Prior swing high/low
• EMA crossover
• Risk-to-reward target (e.g. 2R)

Example Trade Setup

Market: GBP/USD 1H chart

• Price above 13 EMA → uptrend
• EFI dips negative during retracement
• EFI spikes above 0 with a bullish engulfing candle
  Trade: Long GBP/USD
  Stop-loss: Below retracement low
  Target: Previous high or 2R level

Best Tools and Platforms

• TradingView (Force Index built-in)
• MetaTrader 4/5
• Thinkorswim
• Custom scripts: For smoothed EFI and alerts
• Combine with RSI or MACD for extra confirmation

Best Markets and Timeframes

Markets:
Forex: EUR/USD, GBP/JPY, AUD/USD
Stocks: Trendy large caps or ETFs
Crypto: BTC/USD, ETH/USD
Commodities: Gold, crude oil

Timeframes:
Intraday: 15M–1H
Swing: 4H–Daily
Position: Daily–Weekly

Common Mistakes to Avoid

• Using EFI without a trend filter → many false signals
• Ignoring volume context (especially in forex or low-liquidity assets)
• Overtrading small EFI signals—wait for clear spikes or crossovers
• Not confirming with price action or candlestick context
• Using too short of an EFI period (can create noise)

Conclusion

The Elder’s Force Index & EMA Strategy merges price, volume, and momentum into one powerful system. By aligning with the prevailing trend and confirming strength using EFI, traders can catch high-probability entries with minimal lag. It also provides an edge in timing pullbacks, breakouts, and divergence trades.

To master this strategy, along with other professional-level momentum and volume systems, enrol in our expert Trading Courses at Traders MBA and elevate your execution with clarity and precision.