Money Flow Index (MFI)

The Money Flow Index (MFI) is a momentum indicator which ranges between 0 and 100%.  The Money Flow Index uses price and volume to indicate whether money is flowing into or out of a stock.

Money Flow Index (MFI)

The Money Flow Index (MFI) is a momentum indicator which ranges between 0 and 100%.  The Money Flow Index uses price and volume to indicate whether money is flowing into or out of a stock.

 


Money Flow Index Formula

The MFI requires a series of calculations. First, Money Flow (not the Money Flow Index) is calculated by multiplying the period's Typical Price, which is considered to be (High + Low + Close)/3, by the period's volume.

Money Flow Index (MFI) is calculated using a series of formula

If today's Typical Price is greater than yesterday's Typical Price, it is considered Positive Money Flow. If today's price is less, it is considered Negative Money Flow.



Positive Money Flow is the sum of the Positive Money over the specified number of periods. Negative Money Flow is the sum of the Negative Money over the specified number of periods.

The Money Ratio is then calculated by dividing the Positive Money Flow by the Negative Money Flow.  Finally, the Money Flow Index is calculated using the Money Ratio over a period of interest for each day plotted.

Money Flow Index Interpretation

Positive money flow (i.e. buying into the stock) is signaled through increases in the MFI, while negative money flow (i.e. sell-off) is signaled through decreases in the MFI.  Buy signals are issued when the MFI rises above 20% and sell signals are issued when the MFI falls below 80%. 

Price chart with Money Flow Index displayed below

Alternatively, chartists can look for divergences between the stock price and Money Flow Index.

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