Among the myriad of trading indicators available to market participants, the Money Flow Index (MFI) offers a unique perspective by incorporating both price and volume data. This article aims to demystify what MFI is, its underlying calculations, and how traders can effectively utilize it in their trading strategies.
What is Money Flow Index (MFI)?
The Money Flow Index is a technical oscillator that falls in the category of momentum indicators. It is used to identify the flow of money into or out of a security and can serve as a predictor for potential reversals in the market. Similar to the Relative Strength Index (RSI), the MFI oscillates between 0 and 100 but incorporates volume data for a more comprehensive analysis.