Chartered Market Technician (CMT) Practice Exam

Question: 1 / 400

How is the Force Index calculated?

By averaging the closing prices

By multiplying current day's volume by market cap

By subtracting the previous day's close from the current day's close and multiplying by volume

The Force Index is calculated by subtracting the previous day's closing price from the current day's closing price, and then multiplying this difference by the volume of the current day. This formula is significant because it combines price movement with volume, providing insights into the strength of price movements. A rise in the Force Index indicates that the current price movement is supported by a significant volume, which can suggest that the trend is strong and likely to continue. Conversely, a decline in the Force Index signals that the movement may lack sufficient volume backing, indicating potential weakness.

This approach contextualizes price changes relative to the market's trading volume, giving traders a clearer picture of market dynamics. By focusing on both price and volume, the Force Index helps traders identify potentially actionable trends in the market.

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By taking the difference between highest and lowest prices

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