Money flow index
Also known as: MFI
The money flow index is a momentum indicator that combines price and volume to measure the strength of buying and selling pressure behind a 's moves. It is often described as a volume-weighted version of the , since it follows the same logic but gives extra weight to price changes that happen on heavier .
The indicator is calculated by first finding the typical price for each period, an average of the high, low, and close, then multiplying that by volume to get a raw money flow figure. Periods where the typical price rose are treated as positive money flow, and periods where it fell are treated as negative money flow. The ratio of positive to negative money flow over a set lookback period, usually 14 sessions, is converted into a score between 0 and 100. Readings above 80 are generally considered , suggesting buying pressure may be overextended, while readings below 20 are considered .
Because it factors in volume, the money flow index can sometimes signal a shift in momentum before a price-only oscillator like the does, particularly when a move higher or lower is happening on unusually light or heavy trading. Traders also watch for divergence, where the 's price makes a new high or low but the money flow index fails to confirm it, which can hint that the move lacks real conviction behind it. Like any single indicator, it works best alongside other tools rather than as a standalone buy or sell signal.