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Category: Education

MFI or Money Flow Index is a lengthy 4 step formula for momentum, it is much like RSI but, it also adds volume into the equation. MFI tracks price and volume to measure buying and selling pressure, unlike other momentum formulas that mainly focus on price and changes in the price.

Like RSI, MFI tracks between 0 and 100. An MFI > 50 is considered to be bullish, while an MFI > 80 is considered "overbought". Then on the other-side of it, an MFI < 20 is considered "oversold". Now, the numbers are relative, and could mean different things for each individual stock. So it is always best to check it's history to see what the peak and bottom is for it's MFI. If the trend is strong enough, the price can keep going over an 80 MFI. The same goes for going lower. If a downtrend is strong enough, it can keep going lower below an MFI of 20.

MFI is an easy to understand metric but, it should be used with other formulas and not by itself.

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