Money Flow Index (MFI): How to Read It
The Money Flow Index is like an RSI that also includes volume. It measures buying and selling pressure on a 0 to 100 scale, helping spot stretched conditions backed by volume.
The formula
Common settings: 14 periods with 80 and 20 levels
How to read it
- Readings above 80 suggest overbought conditions.
- Readings below 20 suggest oversold conditions.
- Rising MFI with rising price confirms buying pressure.
- Divergence between MFI and price can signal weakening moves.
- Volume weighting makes it react to heavy trading days.
Typical signals
- MFI rising back above 20 as possible renewed buying.
- MFI falling back below 80 as possible fading buying.
- Bearish divergence when price rises but MFI falls.
Pitfalls to avoid
- Can stay overbought during strong uptrends.
- Depends on accurate volume data.
- Single heavy-volume days can cause sharp jumps.
FAQ
How is MFI different from RSI?
MFI includes volume in its calculation, while RSI uses price changes only.
What MFI levels matter?
80 and 20 are the traditional overbought and oversold levels.
Can MFI show divergence?
Yes, and many traders watch for MFI and price moving in opposite directions.
Works well with
Relative Strength Index
The Relative Strength Index measures the speed and size of recent gains versus losses on a scale from 0 to 100. It helps spot when a market may be stretched too far in one direction.
🧱On-Balance Volume
On-Balance Volume keeps a running total that adds volume on up days and subtracts it on down days. It helps show whether volume is flowing into or out of an asset.
📊Volume
Volume shows how many shares, contracts or coins traded during each period. It reveals the level of participation behind a price move and helps judge whether a move has conviction.