Adaptive Elder Force Index with Volatility Channels
Summary
The document explains an Elder Force Index oscillator that combines price change and volume, then smooths the result with exponential moving averages to produce an EFI line and a signal line. It describes fixed-length and adaptive calculation modes. In adaptive mode, a band-pass filter estimates a dominant cycle and adjusts the smoothing periods to market conditions.
Volatility bands are calculated from changes in the EFI itself and drawn around the signal line at three multiplier levels. The document presents the zero line for directional context, outer-band touches as possible climactic moves, divergences as signs of weakening pressure, and EFI-signal crossovers as possible entry cues. Optional truncation caps extreme plotted readings. These are indicator interpretations rather than tested trading rules: the document provides no performance results or evidence that the signals predict reversals. The code and settings describe one implementation, whose behavior depends on its calculation choices and input data.
Key ideas
- The raw Force Index multiplies the close-to-close price change by volume.
- Exponential averages smooth the raw measure into an EFI line and a slower signal line.
- An optional band-pass filter estimates a dominant cycle to adapt smoothing lengths.
- Bands based on changes in EFI mark unusually large oscillator readings relative to its recent volatility.
- Zero-line position, divergences, band extremes, and line crossovers are presented as interpretive signals, not validated forecasts.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.