Money Flow Index or MFI
Money flow index or MFI is a momentum indicator used to gauge the strength of a trend by analyzing the price and volume associated with a security. It is similar to Relative Strength Index or RSI, the difference is it also considers volume, whereas RSI only considers price. MFI measures the strength of money flow in and out of the security and is a comparison of positive and negative money flow. The formula is,
Both calculations give the same result. Money ratio, PMF and NMF values are calculated by,
Typical Price = (High + Low + Close) / 3
Money Flow = Typical Price x Volume.
Positive Money Flow (PMF) = Sum of money flow for days where typical price is increased.
Negative Money Flow (NMF) = Sum of money flow for days where typical price is decreased.
Money Ratio = (Positive Money Flow /Negative Money Flow)
Money flow index is represented as a range bound oscillator having a maximum value of 100 and minimum value of 0. It is interpreted the same as RSI, the values above 80 are considered overbought and values below 20 are considered oversold. Divergences of price and MFI are considered more important signals. When price and MFI moves in opposite directions, it indicates the weakening of an existing trend and a possibility of trend reversal. Like RSI, MFI is also widely used with a 14 day time period, but traders can adjust that to get custom results; the lesser the time frame, the more the volatility of the indicator..
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Money Flow Index, MFI = 100 - (100/1 + Money Ratio)
OR
MFI = 100 x (PMF / (PMF + NMF)
OR
MFI = 100 x (PMF / (PMF + NMF)
Both calculations give the same result. Money ratio, PMF and NMF values are calculated by,
Typical Price = (High + Low + Close) / 3
Money Flow = Typical Price x Volume.
Positive Money Flow (PMF) = Sum of money flow for days where typical price is increased.
Negative Money Flow (NMF) = Sum of money flow for days where typical price is decreased.
Money Ratio = (Positive Money Flow /Negative Money Flow)
Money flow index is represented as a range bound oscillator having a maximum value of 100 and minimum value of 0. It is interpreted the same as RSI, the values above 80 are considered overbought and values below 20 are considered oversold. Divergences of price and MFI are considered more important signals. When price and MFI moves in opposite directions, it indicates the weakening of an existing trend and a possibility of trend reversal. Like RSI, MFI is also widely used with a 14 day time period, but traders can adjust that to get custom results; the lesser the time frame, the more the volatility of the indicator..
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by NobleTrading at
8:51 AM
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