The Money Flow Index (MFI) is a momentum indicator that measures the strength of money flowing in and out of a security. It is related to the Relative Strength Index (RSI), but where the RSI only incorporates prices, the Money Flow Index accounts for volume.
Look for divergence between the indicator and the price action. If the price trends higher and the MFI trends lower (or vice versa), a reversal may be imminent.
Look for market tops to occur when the MFI is above 80. Look for market bottoms to occur when the MFI is below 20.
The Money Flow Index requires a series of calculations.
Money Flow = Typical Price * Volume
If today's Typical Price is greater than yesterday's Typical Price, it is considered as a Positive Money Flow and if today's price is less, it is considered as a Negative Money Flow.
| Positive Money Flow is the sum of the Positive Money over the specified number of periods. Negative Money Flow is the sum of the Negative Money over the specified number of periods. | |
| The Money Ratio is then calculated by dividing the Positive Money Flow by the Negative Money Flow. |
Money Ratio = Positive Money Flow / Negative Money Flow
Money Flow Index = 100 - ( 100 / ( 1 + Money Ratio ))
The standard MFI works with a fourteen-day parameter : n = 14
GT::Indicators::MFI->new()
GT::Indicators::MFI->new([8])
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