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Lesson 23 - Money Flow Index - Money Flow Index (MFI)

The Money Flow Index (MFI) is the technical indicator that indicates the rate at which money is invested in a currency (or financial instrument, whether equities, derivatives, etc.) And then withdrawn. The construction and interpretation of the indicator are similar to the Relative Strength Index (RSI) with the only difference that the volume is important in the MFI.

analyzing the technical indicator Money Flow Index is required to consider the following points:

1 .- Differences between the values \u200b\u200bof price and the indicator. If prices grow while MFI falls (or vice versa), there is a high probability that the price change of trend. 2 .- Values \u200b\u200b
technical indicator Money Flow Index values \u200b\u200bexceeding 80 or who are under 20, are clear signs of overbought (over 80) or oversold (below 20). Calculation

The calculation of technical indicator Money Flow Index includes several steps. At first you define the typical price (TP) for the period in question.

The Calculation of Money Flow Index includes Several stages. At first one defines the typical price (TP) of the Period in question. TP

= (Maximum + Minimum + Close) / 3

then calculated in amount of Money Flow (MF):

MF = TP * VOLUME

The following figure shows a clear example of the use of technical indicator Money Flow Index (MFI) in the crude market . We can see a clear divergence announcing the falling price of crude.