Money Flow Index - MFI

What is the '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.

BREAKING DOWN '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)

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RELATED FAQS
  1. 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 ... Read Answer >>
  2. Why is the Money Flow important for traders and analysts?

    See why the concept of money flow is useful in technical stock market analysis, and how traders and analysts can use money ... Read Answer >>
  3. 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 ... Read Answer >>
  4. What are the main differences and similarities between Money Flow and Real Flow?

    Learn the meaning of the terms "money flow" and "real flow," and find out how they relate to each other as they are used ... Read Answer >>
  5. How do I identify divergence on a security?

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