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. Net Volume

    A term in technical analysis that represents a security's uptick ...
  3. Relative Strength Index - RSI

    A technical momentum indicator that compares the magnitude of ...
  4. Mass Index

    A form of technical analysis that looks at the range between ...
  5. On-Balance Volume (OBV)

    A momentum indicator that uses volume flow to predict changes ...
  6. Negative Volume Index - NVI

    A technical indicator that relies on changes in a security’s ...
Related Articles
  1. Trading Strategies

    What are the main differences between Money Flow & Money Flow Index (MFI)?

    Find out how to differentiate between standard money flow and the Money Flow Index, two methods of expressing the strength behind a security's price trend.
  2. Technical Indicators

    What are the best technical indicators to complement the McGinley Dynamic Indicator?

    Read about the strengths and weaknesses of the McGinley dynamic indicator, and find out which technical indicators are best to complement this trend-follower.
  3. Trading Strategies

    What are the best technical indicators to complement the Money Flow?

    Understand the most useful technical indicators to use in conjunction with the money flow index when establishing effective trade entry strategies.
  4. Trading Strategies

    What are the main differences and similarities between Money Flow Index & On Balance Volume?

    Understand the basics of On Balance Volume and the Money Flow Index, including their similarities and differences in terms of calculation and use.
  5. Technical Indicators

    What are the main differences and similarities between the Money Flow Index (MFI) & Relative Strength ...

    Learn to distinguish between the relative strength index (RSI), a popular momentum oscillator, and the money flow index (MFI), often called the volume-weighted RSI.
  6. Technical Indicators

    How do I identify divergence on a security?

    Learn how to spot divergence using oscillators such as the relative strength index and money flow index, and see how to profit from this scenario.
  7. 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.
  8. Technical Indicators

    What are some of the most common technical indicators that back up Doji patterns?

    Learn important technical indicators that reinforce a doji candlestick pattern to take advantage of profitable trading opportunities.
  9. Forex Strategies

    How do I use Fibonacci Clusters for creating a forex trading strategy?

    Find out how traders in the forex market can implement Fibonacci cluster analysis with their currency pairs to identify areas of strong support and resistance.
  10. Forex Strategies

    How do I use Moving Average Convergence Divergence (MACD) for creating a forex trading strategy?

    Consider some forex trading strategies that can be designed using the exponential moving average (EMA) lines on the moving average convergence divergence (MACD).

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center