The EFI is often favoured by traders when identifying dip-buying opportunities. It uses both price and volume data to determine the strength and continued viability of price moves.
This guide will show you how to plot the EFI on the BTSE platform and use it to simulate a “dip-buying” trade.
The EFI can be plotted on a chart using the BTSE platform
In a bullish trend, the EFI can assist “dip buying” strategies
A trader will buy when the EFI crosses from below to above 0
In a bearish trend, the EFI can assist “short the bounce” strategies
A trader will short when the EFI crosses from above to below 0
How To Plot The EFI On Your Chart
Step 1: Load up a chart on the BTSE platform
Step 2: Click on the “Indicators” tab or push the “/” key
Step 3: Click on “Elder’s Force Index” in the drop-down menu
Step 4: Admire your freshly generated EFI
How To Buy Dips With The EFI
Buy when the EFI crosses from below to above 0
The EFI buy signals and the corresponding price points are indicated by the green arrows below:
This is a cherry-picked example of when the EFI was effective in timing dip-buying opportunities in a pre-existing uptrend.
The existence of a pre-existing uptrend is important for the accuracy of this strategy and traders are likely to experience multiple false signals in sideways or consolidating markets.
The accuracy of EFI signals can be greatly improved by combining them with trend identification indicators such as trendlines and the ADX.
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