Money Flow Index

What is the definition of Money Flow Index?

The Money Flow Index (MFI) is an oscillator that uses both price and volume to measure buying and selling pressure. Money flow is defined as the typical daily price times today's volume, a kind of approximation to the dollar value of a day's trading. MFI is the percentage of the total money flow that is up.

The money flow index is calculated by using the following formula:

  • Typical Price = (High + Low + Close) / 3
  • Money Flow = Typical price * Volume
  • Money Ratio = Positive Money Flow/Negative Money Flow
  • Money Flow Index = 100 - (100/ (1 + Money Ratio))

Stockopedia explains Money Flow Index...

Created by Gene Quong and Avrum Soudack, MFI is also known as volume-weighted RSI. MFI is used as an oscillator. A value of 80 is generally considered overbought, or a value of 20 oversold. Divergences between MFI and price action are also considered significant, for instance if price makes a new rally high but the MFI high is less than its previous high then that may indicate a weak advance, likely to reverse.

You can read more about it here on Wikipedia.

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