The Money Flow Index, or MFI, is an indicator that displays a stock’s flow of capital. The indicator is comparable to the RSI Index, but the RSI does not utilize volume information. A high MFI value means that the market is buying in large volumes (overbought). A low MFI value means that large volumes are being sold (oversold).
Divergences are key to the MFI, so if this indicator falls while the price rises, a trend reversal can be expected. The same goes for a rising MFI in a bearish market.
With an MFI above 80, the market is probably approaching a top. With an MFI below 20, the bottom is likely to be in sight.
- MFI period
BUY AND SELL SIGNALS
This example is showing MFI on the FDAX on a daily chart inside NanoTrader. Peaks in volume above 80 indicate the market might be overbought. We do in fact see markets cooling down after such peaks are reached.
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