Money Flow Index (MFI)
The Volume-Weighted RSI That Tracks Real Cash Flow
The Money Flow Index (MFI) is like RSI on steroids – it fuses price momentum with volume to reveal where the real money is flowing. Often called a 'volume-weighted RSI', MFI scales 0–100 and highlights overbought/oversold zones, divergences, and trend strength, but only when actual trading participation backs it up. Thin-volume moves get muted, heavy-volume surges light it up. It's the smart way to separate genuine conviction from fakeouts – perfect for traders who want momentum signals that respect the power of capital commitment.
Step-by-Step Calculation
The recipe:
- Typical Price (TP): (High + Low + Close) / 3
- Raw Money Flow (RMF): TP × Volume
- Positive Flow: Sum RMF on days TP > previous TP
- Negative Flow: Sum RMF on days TP < previous TP
- Money Ratio: Positive Flow / Negative Flow (over N periods)
- MFI = 100 − (100 / (1 + Money Ratio))
Classic N = 14; volume weighting makes high-participation days dominate.
Reading the Levels
Zone guide:
- >80: Overbought – buying climax, watch for reversals or divergence.
- 20–80: Normal flow – follow slope for momentum bias.
- <20: Oversold – selling climax, potential bounce zone.
- Crossing 50: Momentum shift – above bullish, below bearish.
Extremes with volume backing = real conviction; thin volume extremes = suspect.
Parameter Tweaks
Period choices:
- Short (7–10): Faster signals – intraday/scalping, more noise.
- Classic (14): Balanced swing timing.
- Longer (20–30): Smoother – filters noise on higher timeframes.
Bands: 90/10 for volatile crypto; 80/20 standard equities.
Pro Trading Setups
Battle-tested plays:
- Overbought/oversold reversal: MFI >80 + turn down → short; <20 + turn up → long.
- Trend filter: Breakout only if MFI crossing 50 in direction.
- Divergence power: Price higher high + MFI lower high → bearish reversal setup.
- Pullback entry: Uptrend + MFI dip to 40–60 then cross up → volume-backed re-entry.
Volume weighting makes divergences especially reliable – money not confirming price.
Smart Combinations
Pair for edge:
- Trend tools (MA/ADX): Positive MFI in uptrend = conviction.
- Price action: Extreme MFI + reversal candle = strong signal.
- ATR/Keltner: MFI breakout through 50 + price outside channel = momentum expansion.
- OBV: Dual volume confirmation.
Strengths and Limitations
The Wins
- Volume weighting filters fake moves – real money confirmation.
- Sharper divergences than plain RSI.
- Clear 0–100 scale with intuitive zones.
- Works across timeframes and volume-reporting assets.
The Gotchas
- Needs reliable volume – weak on spot FX or thin stocks.
- Can stay extreme in runaway trends.
- More signals than pure volume tools – filter needed.
Your MFI Launch Checklist
- Start with classic 14-period.
- Overlay 80/20 (or 90/10) bands and 50 line.
- Require trend or price action confirmation.
- Hunt divergences – often highest reward.
- Backtest extreme and 50-cross performance.
- Adjust period/bands for asset volatility.
Key Takeaways
MFI is volume-weighted RSI – momentum with real capital backing.
>80/<20 extremes, 50 crosses, and divergences = core signals.
Filters fakeouts beautifully – only moves with volume count.
Perfect for confirming trends, spotting reversals, and divergence plays.
Combine with trend tools and price action – and follow the true money flow. Stay volume-smart and trade strong!
Money Flow Index (MFI)
The Volume-Weighted RSI That Tracks Real Cash Flow
The Money Flow Index (MFI) is like RSI on steroids – it fuses price momentum with volume to reveal where the real money is flowing. Often called a 'volume-weighted RSI', MFI scales 0–100 and highlights overbought/oversold zones, divergences, and trend strength, but only when actual trading participation backs it up. Thin-volume moves get muted, heavy-volume surges light it up. It's the smart way to separate genuine conviction from fakeouts – perfect for traders who want momentum signals that respect the power of capital commitment.
Table of Contents
Step-by-Step Calculation
The recipe:
- Typical Price (TP): (High + Low + Close) / 3
- Raw Money Flow (RMF): TP × Volume
- Positive Flow: Sum RMF on days TP > previous TP
- Negative Flow: Sum RMF on days TP < previous TP
- Money Ratio: Positive Flow / Negative Flow (over N periods)
- MFI = 100 − (100 / (1 + Money Ratio))
Classic N = 14; volume weighting makes high-participation days dominate.
Reading the Levels
Zone guide:
- >80: Overbought – buying climax, watch for reversals or divergence.
- 20–80: Normal flow – follow slope for momentum bias.
- <20: Oversold – selling climax, potential bounce zone.
- Crossing 50: Momentum shift – above bullish, below bearish.
Extremes with volume backing = real conviction; thin volume extremes = suspect.
Parameter Tweaks
Period choices:
- Short (7–10): Faster signals – intraday/scalping, more noise.
- Classic (14): Balanced swing timing.
- Longer (20–30): Smoother – filters noise on higher timeframes.
Bands: 90/10 for volatile crypto; 80/20 standard equities.
Pro Trading Setups
Battle-tested plays:
- Overbought/oversold reversal: MFI >80 + turn down → short; <20 + turn up → long.
- Trend filter: Breakout only if MFI crossing 50 in direction.
- Divergence power: Price higher high + MFI lower high → bearish reversal setup.
- Pullback entry: Uptrend + MFI dip to 40–60 then cross up → volume-backed re-entry.
Volume weighting makes divergences especially reliable – money not confirming price.
Smart Combinations
Pair for edge:
- Trend tools (MA/ADX): Positive MFI in uptrend = conviction.
- Price action: Extreme MFI + reversal candle = strong signal.
- ATR/Keltner: MFI breakout through 50 + price outside channel = momentum expansion.
- OBV: Dual volume confirmation.
Strengths and Limitations
The Wins
- Volume weighting filters fake moves – real money confirmation.
- Sharper divergences than plain RSI.
- Clear 0–100 scale with intuitive zones.
- Works across timeframes and volume-reporting assets.
The Gotchas
- Needs reliable volume – weak on spot FX or thin stocks.
- Can stay extreme in runaway trends.
- More signals than pure volume tools – filter needed.
Your MFI Launch Checklist
- Start with classic 14-period.
- Overlay 80/20 (or 90/10) bands and 50 line.
- Require trend or price action confirmation.
- Hunt divergences – often highest reward.
- Backtest extreme and 50-cross performance.
- Adjust period/bands for asset volatility.
Key Takeaways
MFI is volume-weighted RSI – momentum with real capital backing.
>80/<20 extremes, 50 crosses, and divergences = core signals.
Filters fakeouts beautifully – only moves with volume count.
Perfect for confirming trends, spotting reversals, and divergence plays.
Combine with trend tools and price action – and follow the true money flow. Stay volume-smart and trade strong!
Related Terms
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