• Home
• README

Elder’s Force Index (EFI)

Elder’s Force Index (EFI)

Category: Volume-based Type: Momentum oscillator Used for: Trend confirmation, divergence spotting, breakout validation

Overview

Elder’s Force Index (EFI) is a technical indicator developed by Dr. Alexander Elder. It combines price change and volume into a single value to measure the strength of market moves. Unlike oscillators that rely solely on price (e.g. RSI, MACD), EFI incorporates volume, which makes it particularly useful in identifying the conviction behind market movements.

Formula

There are two core steps in calculating EFI:

1. Raw Force Index

FI = (Close_today - Close_yesterday) * Volume_today

This gives a one-period measurement of price momentum weighted by volume.

2. Smoothed Force Index (EFI)

To reduce noise, apply an Exponential Moving Average (EMA):

EFI_n = EMA(FI_raw, n)

Where n is a configurable smoothing length (default: 13).

Typical Use Cases

1. Trend Confirmation

• EFI > 0: Bulls are in control (upward momentum)
• EFI < 0: Bears are dominant (downward pressure)
• Rising EFI → Increasing trend strength
• Falling EFI → Weakening trend

2. Divergence Detection

• Bullish Divergence: Price makes new lows, but EFI makes higher lows → potential reversal upward
• Bearish Divergence: Price makes new highs, but EFI makes lower highs → possible bearish setup

3. Zero Line Cross

• Cross above zero → bullish momentum signal
• Cross below zero → bearish momentum signal

Indie Implementation (Lang v5)

#education purpose
# indie:lang_version = 5
from indie import indicator, plot, color, param, MutSeriesF
from indie.algorithms import Ema
@indicator("Elder's Force Index", overlay_main_pane=False)
@param.int('length', default=13, min=1, title="Length")
@plot.line(id='#plot_0')
def Main(self, length):
    # Create a mutable series for the Force Index calculation
    fi_series = MutSeriesF.new((self.close[0] - self.close[1]) * self.volume[0])
    # Apply exponential moving average (EMA) to smooth the Force Index
    efi = Ema.new(fi_series, length)[0]
    # Return the plotted Force Index with a white color line
    return plot.Line(efi, color=color.WHITE)

Explanation:

• MutSeriesF allows building a time series that can be modified at each step.
• Ema.new(series, length)[0] returns the smoothed series.
• The result is plotted as a white line on a separate (non-overlay) pane.

Pine Script Equivalent

//education purpose
//@version=3
// Author: Sheldon Patnett
// Discord: Sheldon#7775  / https://discord.gg/t2JTnAa
study("Elder's Force Index Function (with source)")
// User-defined input for EMA length
length = input(defval=13, title="Length")
// Function to calculate Elder's Force Index
pine_efi(len) =>
    // Calculate the raw Force Index value
    src = ((close - close[1]) * volume)
    // Apply EMA to smooth the Force Index
    efi = ema(src, len)
// Plot the Elder's Force Index with white color
plot(pine_efi(length), color=#ffffff)

Key Differences vs Indie:

• Pine uses arrayless logic, whereas Indie supports mutable series (MutSeriesF)
• ema() in Pine is functionally equivalent to Ema.new(...)[0] in Indie

Strategy Tips

• Combine EFI with moving averages to avoid trading against the trend.
• Use divergences as confirmation, not standalone signals.
• In sideways markets, EFI may give false signals due to low volume or noise.

Limitations

• Lag: Due to smoothing, EFI may react late to fast reversals.
• Volume Sensitivity: EFI heavily depends on accurate volume data. Use cautiously in markets with low or inconsistent volume reporting (e.g., some crypto pairs).
• Not suitable for ranging markets without a filter.

Example Pattern Recognition

Bullish Setup:

• Price forming higher lows
• EFI turning up from negative and crossing zero

Bearish Setup:

• Price hitting resistance
• EFI declining and crossing below zero

Recommended Settings

• 13-period EMA: Best for medium-term swing trading
• 2-period EMA: Suitable for scalping or short-term signals