EFI = (close of the current day - close of the previous day) * of the current day
If measure the force of the price change.
If you calculate the of the last two days to smooth the signal ( EFI ,2), you have a nice buy/sell indicator in the context of the "Elder Triple Screen Method":
- If you are in a long term uptrend (for example (13) going up), you have a buy signal if EFI (2)<0, because then you have a short term downtrend in a long term uptrend. Put a "stop buy" a bit higher in case the long term uptrend continues.
- If you are in a long term downtrend (for example (13) going down), you have a sell signal if EFI (2)>0, because then you have a short term uptrend in a long term downtrend. Put a "stop sell" a bit lower in case the long term downtrend continues.
This graph shows you colored columns for the ( EFI ,2), which is more visible than the one-color indicator provided by default by TV.
You can also display the EFI itself on top of the columns. (optional, I personaly do not use it)
PS: (13) is to make the explanation simple. Personaly, I use histogram on a weekly view to define if I am on a long term uptrend or downtrend.