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Money Flow Index - MFI Indicator

What is Money Flow Index

Money Flow Index (MFI) is a technical indicator that estimates money inflow intensity into a certain asset by comparing price increases and decreases over a given period, but also taking into consideration trading volumes.s.

How to use Money Flow Index in trading platform

Test the Money Flow Index in Action

The Money Flow Index is a technical analysis tool that will help you to trade more effectively.
Learn more about it in our educational guide. Confirm the theory on practice.
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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

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.

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Details
Author
Mahmoud Salha
Publish date
26/05/24
Reading Time
-- min
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