Money Flow Index - MFI

AAA

DEFINITION of 'Money Flow Index - MFI'

A momentum indicator that uses a stock’s price and volume to predict the reliability of the current trend. Because the Money Flow Index adds trading volume to the Relative Strength Index (RSI), it’s sometimes referred to as volume-weighted RSI. 

INVESTOPEDIA EXPLAINS 'Money Flow Index - MFI'

Arriving at the index figure requires several steps. The developers of the Money Flow Index, Gene Quong and Avrum Soudack, suggested using a 14-day period for calculations.

1. Determine the Typical Price as follows: (High + Low + Close) / 3

2. Calculate the Raw Money Flow: Typical Price x Volume

3. Identify the Money Flow Ratio: (14-period Positive Money Flow) / (14-period Negative Money Flow)

(Note: Positive money values are created when the typical price is greater than the previous typical price value. The sum of positive money over the number of periods – usually 14 days – is the positive money flow. The opposite is true for the negative money flow values.)

4. Finally, arrive at the Money Flow Index. This is: 100 – [100/(1 + Money Flow Ratio)]

 

Many traders watch for opportunities that arise when the MFI moves in the opposite direction as the price. This divergence can often be a leading indicator of a change in the current trend.

Money Flow Index (MFI)

RELATED TERMS
  1. Money Flow

    Calculated by averaging the high, low, and closing prices, and ...
  2. Relative Strength Index - RSI

    A technical momentum indicator that compares the magnitude of ...
  3. Net Volume

    A term in technical analysis that represents a security's uptick ...
  4. Indicator

    Indicators are statistics used to measure current conditions ...
  5. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  6. Mass Index

    A form of technical analysis that looks at the range between ...
RELATED FAQS
  1. What are the main differences between Money Flow & Money Flow Index (MFI)?

    The concept behind money flow and the money flow index (MFI) are both closely related to momentum and volume. Like many leading ... Read Full Answer >>
  2. What are the best technical indicators to complement the McGinley Dynamic Indicator?

    The McGinley dynamic indicator was actually designed as a smoothing tool, useful for trend following but not for generating ... Read Full Answer >>
  3. What are the main differences and similarities between Money Flow Index & On Balance ...

    Though both are useful momentum indicators popular among analysts and traders, the Money Flow Index (MFI) and On Balance ... Read Full Answer >>
  4. What are the best technical indicators to complement the Money Flow?

    The money flow index (MFI) is a momentum indicator that is popular among traders and analysts. Its calculation and interpretation ... Read Full Answer >>
  5. What are the main differences and similarities between the Money Flow Index (MFI) ...

    The money flow index (MFI) represents the volume-weighted adaptation of the more widely used relative strength index (RSI). ... Read Full Answer >>
  6. How do I identify divergence on a security?

    Divergence occurs when a security's price moves opposite relevant indicators, creating a disparate situation that traders ... Read Full Answer >>
Related Articles
  1. Technical Indicators

    The Basics Of Money Flow

    Learn how this indicator uses both price and volume to record a more complete picture of price action.
  2. Trading Strategies

    Know How To Manage Gaps On Your Trading Strategy

    Gaps generate profitable strategies right after they print, as well as during retracements that test those levels, often months or years later.
  3. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  4. Chart Advisor

    ChartAdvisor for February 27 2015

    A weekly technical summary of the major U.S. indexes.
  5. Chart Advisor

    Trade Healthcare Providers with this ETF

    In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Here's an ETF to consider.
  6. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  7. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 1000 set up special trading opportunities that take advantage of shifting crowd psychology.
  8. Options & Futures

    The Most Important Technical Indicators For Binary Options

    Trading binary options is not for the novice, but if you're ready to delve in, get to know the best technical indicators.
  9. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  10. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center