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.
Improve Your Market Timing
Colin Twiggs' weekly review of the global economy will help you identify market risk and improve your timing.
Join our free Trading Diary mailing list with over 140,000 subscribers.
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.
Active or Reactive?
Many investors follow active strategies but end up being reactive, rotating in and out of stocks at the wrong time.
Colin Twiggs' free weekly review of global markets will help you identify market risk and improve your timing.
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)