- Education
- Forex Technical Analysis
- Technical Indicators
- Volume Indicators
- Money Flow Index
Money Flow Index - MFI Indicator
What is Money Flow Index
How to use Money Flow Index in trading platform
How to Use Money Flow Index
The indicator can be used to identify whether an asset is overbought or oversold, as well as to determine possible turning points.
Analyzing extreme (overbought/oversold) areas:
- If MFI climbs above 80, the asset is generally considered to be overbought. A sell signal appears if MFI crosses the overbought area boundary from above;
- If MFI drops below 20, the asset is generally considered to be oversold. A buy signal appears if MFI crosses the oversold area boundary from below.
Divergence patterns analysis:
- Rising MFI along with decreasing prices indicates the downtrend may be weakening;
- Falling MFI along with rising prices indicates the uptrend may be weakening.
Money Flow Index (MFI) Indicator
Money Flow Index Formula (Calculation)
The following steps are required for Money Flow Index calculation:
1. TP = (H + L + C) / 3;
2. MF = TP*Vol;
3. MR = Sum(MF+) / Sum(MF-);
4. MFI = 100 – (100 / (1 + MR)),
where:
TP – typical price;
H – current high;
L – current low;
C – close price;
MF – money flow (positive (MF+) if current TP > previous TP, negative (MF-) otherwise);
Vol – volume;
MR – money ratio.
Use indicators after downloading one of the trading platforms, offered by IFC Markets.
Not sure about your Forex skills level?
Take a Test and We Will Help You With The Rest