MFI - Money Flow Index
Learn Money Flow Index - the volume-weighted RSI. Identify buying and selling pressure with price and volume analysis.
What is MFI?
The Money Flow Index (MFI) is often called the "volume-weighted RSI." It uses both price and volume to measure buying and selling pressure, making it more reliable than RSI alone.
MFI = 100 - (100 / (1 + Money Flow Ratio))
Money Flow = Typical Price × Volume
Positive Flow: when TP > Previous TP
Negative Flow: when TP < Previous TP
Money Flow = Typical Price × Volume
Positive Flow: when TP > Previous TP
Negative Flow: when TP < Previous TP
RSI
Price only
No volume consideration
Good for forex
MFI
Price + Volume
Shows money flow
Best for stocks/crypto
How to Interpret
Key Levels
- Above 80: Overbought - heavy buying, possible exhaustion
- Below 20: Oversold - heavy selling, possible bounce
- 50 level: Equilibrium between buyers and sellers
MFI Divergence
Because MFI includes volume, its divergence signals can be more reliable than RSI:
- Bullish Divergence: Price makes lower low, MFI makes higher low → Smart money accumulating
- Bearish Divergence: Price makes higher high, MFI makes lower high → Smart money distributing
GarudaAlgo Implementation
GarudaAlgo Enhancement
GarudaAlgo uses MFI for volume-confirmed signals on assets with reliable volume data. We cross-check MFI with OBV for additional confirmation of money flow direction.
- Period: 14 (standard)
- Best for: Stocks, Crypto (where volume is accurate)
- Not ideal for: Forex (decentralized volume)
Trading Strategies
Strategy 1: Extreme Reversals
- Wait for MFI to exceed 80 (overbought) or go below 20 (oversold)
- Watch for MFI to turn back from extreme
- Confirm with candlestick reversal pattern
- Enter when MFI crosses back through 80 or 20
Strategy 2: MFI Divergence
- Identify divergence between MFI and price at key levels
- More reliable than RSI divergence because volume confirms
- Trade in direction of divergence signal