The Money Flow Index (MFI) is an indicator illustrating the strength of money flowing into and out of a security. While related to the Relative Strength Index(RSI), this indicator accounts for volume while the RSI only incorporates pricing information.
Indicator can be interpreted in two ways:
- Market tops may occur when the MFI is greater than 80. Market bottoms may occur when the MFI is less than 20.
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You can look for divergence between the MFI and the price action. If the price trends higher and the MFI trends lower (or vice versa), a reversal may be imminent.
Calculation:
If TypPrice>PrevTypPrice then PositiveMoneyFlow=1, NegativeMoneyFlow=0
If TypPrice<PrevTypPrice then NegativeMoneyFlow=1, PositiveMoneyFlow=0
TypPrice = Typical Price indicator value
PrevTypPrice = Previous value of the Typical Price indicator
PositiveMoneyFlow = The number of days in which Typical Price is greater than the previous day.
NegativeMoneyFlow = The number of days in which Typical Price is less than the previous day.
Inputs:
Period = 14
Indicates time period(the number of days for daily analysis, the number of weeks for weekly analysis, etc.).
Indicator Type: Market Strength