The Money Flow Index is a volume-weighted version of the Relative Strength Index, used to warn of trend weakness and likely reversal points. The indicator compares the value traded on up-days to value traded on down-days.
Ranging markets can be identified by Money Flow Index fluctuating close to the 50 level.
Market tops are likely when a medium term Money Flow Index is above 80.
Market bottoms are likely when a medium term Money Flow Index is below 20.
Only trade with the trend and exit using a trend indicator.
Mouse over chart captions to display trading signals.
- Go long [L] on a bullish divergence. Exit when the moving average turns down at [X].
The default Money Flow Index window is 14 days. Overbought/oversold are set at 80% and 20% levels. To alter the default settings - Edit Indicator Settings.
See Indicator Panel for directions on how to set up an indicator.
- Calculate Typical Price for each period:
(High + Low + Close) / 3
- Calculate Money Flow for each period:
Typical Price * Volume
- Decide on the time
frame over which to calculate the index. This should be based on the
cycle that you are trading.
- Calculate Positive Money Flow:
Add Money Flow for each period (in the time frame) that Typical Price moves up.
- Calculate Negative Money Flow:
Add Money Flow for each period (in the time frame) that Typical Price moves down.
- Calculate the Money Ratio:
Positive Money Flow / Negative Money Flow
- Calculate the Money Flow Index:
100 - 100 / (1+ Money Ratio)