Python Finance and Math Tutorials: Elder Force Index (EFI) Introduction

Key Takeaways

foreign welcome to another python mathematics and finance indicators tutorial video in this video we're going to be talking about Elder Force index in the next couple videos we'll be talking about it so what is the elder Force index the idea of it is to measure directional intensity it's going to oscillate above and below the zero line and basically the idea of it is to consider changes in price and volume obviously for the intensity part that's where you know volume is coming in so in the price change times you know how much volume has come through that gives you directional intensity the calculation of EFI is going to be pretty close to what I just said it's going to be the current close minus the previous close so what's the actual price difference here times the volume that's it um then you're going to have like generally an EMA applied to that line so you know usually like a 14 period EMA is used but you can use anything you want you can use a two periodma or even like a one period you know you want to be crazy about it so uh anyway so that's the other Force index now what I'd like to do is show you guys an example so let me bring up our charting application here so uh let's plot up Apple for example and so here's an elder Force index for apple as you can see it is uh uh pretty closely mimicking volume like right you had a huge spike in volumes notably it goes like way down and it comes back up again another huge spike in volume it goes down again and here there's a spike in volume and a spike in the Elder Force index and so on and then it goes down again so obviously you can see that so this is the 14. so what if we like lowered that to like maybe more like a 15 or I mean a five for Apple so let's let me uh do that real quick so now I lowered it to a five for Apple so let's bring up Apple again with now five and so now you can see it's a lot more of a reactive uh line uh so let me pull it over here and now like if we zoomed in to like a specific area uh we could look at this one specifically uh we can see how it's just very very reactive um much more so than the other one which was pretty late uh we can zoom in to like maybe this spot as well right so it's really it's it's pretty much right on like here and stuff because there's very little change here so what's nice about it is when it's above the zero Mark right that's measuring the intensity of rising so what happens is when it starts you know slowing in its rise you'll see that the EFI many times is actually going to start its decline prior the price starting its decline so that's kind of where it can become um very useful at the same time you can also plot possibly although this says EFI 14 sorry I forgot to change the label for it uh this is indeed an EFI 5. um but anyway yeah you can use different different moving averages right uh and and you can get kind of a signal line going on it's a single line anyway um so that's your EFI uh so in the next video what we're going to be doing is actually programming the EFI into Python and then in the next video I actually chart it up in a charting application like this um actually it's this identical charting application so anyway that sounds interesting to you guys stay tuned to the next video as always thanks for watching