Money Flow Index (MFI)

Money Flow Index (MFI) is an oscillator originally developed by Colin Twiggs as an enhancement of Marc Chaikin’s Money Flow (CMF). MFI is a volume-weighted variant of the RSI that can be used to predict trend reversal. The indicator was developed on the observation that buying opportunities are signaled by rising volume levels together with an increase in the number of closes in the top half of the daily range; Selling opportunities are signaled by rising volume levels together with an increase in the number of closes in the lower half of the daily range.

MFI operates within a range of 0-100. MFI over 80 signals a potential market top while MFI below 20 signals a potential market bottom.

Calculation:
Typical Price = (High + Low + Close) / 3
Money Flow = Typical price * Volume
Money Ratio = Positive Money Flow/Negative Money Flow

Chart Example:

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Tags: Calculation, Chaikin, Oscillators, Trend Reversal, Twiggs, Volume