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Money Flow Index - MFI


ellliottt

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What Does Money Flow Index - MFI Mean?

 

 

A momentum indicator that is used to determine the conviction in a current trend by analyzing the price and volume of a given security. The MFI is used as a measure of the strength of money going in and out of a security and can be used to predict a trend reversal. The MFI is range-bound between 0 and 100 and is interpreted in a similar fashion as the RSI.

 

 

mfi.gif

 

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

 

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 used to create the indicator is used to create the positive money flow - the values used in the money ratio. The opposite is true for the negative money flow values.

 

Money Flow Index = 100 - (100/ (1 + Money Ratio))

 

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Saturated market divided by 2 is saturated Buy (overbought) and Saturated Sell (oversold). The essence of both is to give a signal to us that the market will soon be turning direction.

 

Overbought is a condition where too many traders who open and hold open positions Buy, on the other hand there is no more that a new position because not balanced initially sold. So as to halt trading activity, the remaining is the number of open buy position open.

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This indicator use to be my favourit indicator before infact it use to be my best but I do have some success with it before but there is something here if you can not monitor the indicator in a close range then dont trade because you will surely get disapointed

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Good money management will give good results, thats the reality. to have good money management, then we can be a trader that is able to process the flow of funds traded funds as well as the benefits to the account

 

Money flow index is an indicator and not some money management method. Please take some time to look at your platform or read about it. May find it useful.

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