AS Chakravarthy NCFM Academy Hyderabad Stock Market Technical Analysis : Money Flow Index
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MERCHANDISING WITH MONEY FLOW INDEX
Stock Market Technical Analysis Course in Hyderabad Ameerpet,
The Money Flow Index created by Gene Quong and Avrum Soudack. MFI is also known as volume-weighted RSI. MFI starts with the typical price for each period. It is related to the Relative Strength Index, but where the RSI only incorporates prices, the Money Flow Index accounts for volume.
A ratio of positive and negative money flow is then plugged into an RSI formula to create an oscillator that moves between zero and one hundred. As a momentum oscillator tied to volume, the Money Flow Index is best suited to locate reversals and price extremes with a variety of signal.
TO KNOW OUR Stock Market Training Institute in Hyderabad Please Visit AS Chakravarthy NCFM Academy Hyderabad.The inputs to the Money Flow indicator are given below:
1. Typical Price: (High + Low + Close) / 3
2. Money Flow: Typical Price x Volume
3. Positive Money Flow: The Money Flow on days where typical price is greater than the previous day's Typical Price.
4. Negative Money Flow: The Money Flow on days where the Typical Price is less than the previous day's Typical Price.
5. Money Ratio: Positive Money Flow / Negative Money Flow
6. Money Flow Index: 100 - [100 / (1 + Money Ratio)]
a)Below 20 is considered oversold; a trader might look for buying opportunities at these levels.
b)Above 80 is in overbought territory; a trader might look for sell signals here.
BOTTOMLINE
The Money Flow Index is a unique indicator that combines momentum and volume with an RSI formula. RSI momentum commonly favors the bulls when the indicator is above 50 and the bears when below 50. Though MFI is considered a volume-weighted RSI, using the centerline to determine a bullish or bearish preference does not work as well. MFI is best suited to locate potential reversals with overbought and oversold levels, bullish/bearish divergences, and bullish bearish failure swings.
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