The market has moved down tremendously since the beginning of 2008. Investors that are keen to profit from down moves can make use of options, warrants or CFD to profit from any downward movement in prices.
Today I will introduce to you an interesting indicator developed by Dr Alexander Elder. This is the Force Index Oscillator.
By definition,
Force Index Oscillator = (Close[today] – Close[yesterday]) * Volume[today]
I have applied the following rules:
Enter Short Position :
- Price must be lower than 22 day exponential moving average of the daily closing price today.
- The 22 day exponential moving average of the daily closing price must be decreasing for the past 2 days.
- The 13 day exponential average of the force index oscillator crosses the zero line today
- If condition 1 to 3 is true, open a short position at the market open on the next day.
Exit Short Position :
- If position is showing a loss of 10%, close the trade or
- If the 13 day exponential average of the force index oscillator is less than zero, close the trade
Let’s do a case study. I have chosen YangZhiJiang, a ship building company listed in Singapore Stock Exchange http://sg.finance.yahoo.com/q?s=BS6.SI&d=t
The system identified 6 trading opportunity and 5 of them were profitable.
All trades have been closed.
For more information on Force Index Oscillator, please read the book Come Into My Trading Room: A Complete Guide to Trading
2 comments:
do you use forece index as a regular part of your trading tools? If so, do you find the hard rules help or is it more of an indicator that needs to be studied over time to become familiar with? I'm putting together a triple screen to do the filtering, then I'll use regular technical analysis like support and restance to plane the buy/short. I'm looking at force index as once of the screens.
Now that was interesting.
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