Money Flow Index [MFI]

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The Money Flow Index function determines the strength of money flowing into or out of a security by comparing the volume of upward and downward price changes over a given period of time. Parameters ------------------ Close         The closing price of the security for each given day. High          The high price of the security for each given day. Low           The low price of the security for each given day. Volume      The number of shares of the security that were traded during each given day. Period        The number of bars of data to include in the calculation, including the current value.                   For example, a period of 3 uses the changes for the current bar and the two previous bars. Note that while this function is intended for use with these specific values, any values can be used for these parameters, including other price values and averaged prices. Function Value ------------------------ The Money Flow Index is based on the Money Ratio, which is the ratio of positive money flow to negative money flow over the given period. Positive money flow is defined as the sum of the prices multiplied by the volume on days when the price increases. Negative money flow is defined similarly, except that it includes only days when the price decreases. It has a range of 0 to 100 with values typically remaining between 20 and 80. Higher values indicate overbought conditions while lower values indicate oversold conditions. This is similar to the Relative Strength Index (RSI), except that it includes the volume as a measure of strength. It also typically uses a more complex price model. The Money Flow Index at the beginning of a data series is not defined until there are enough values to fill the given period.. In addition, the value is defined as 100 when no downward changes occur during the given period, resulting in no negative money flow. Usage ----------- The Money Flow Index is used similarly to the Relative Strength Index (RSI). The RSI is typically used with a 9, 14, or 25 calendar day (7, 10, or 20 trading day) period. The more days that are included in the calculation, the less volatile the value. If a divergence is occuring between the price and the Money Flow Index, a price reversal may be imminent. In addition, values above 80 and below 20 often indicate trend reversals. See the sample entry/exit systems for an example using the Money Flow Index. Source ------------ This indicator is based on an entry in "Technical Analysis From A To Z" by Steven B. Achelis.