Technicals
The Money Flow Index (MFI) is a technical indicator that shows the rate at which money is invested into and then withdrawn from a stock. It is similar to the Relative Strength Index, with exception of volume, which is important to the Money Flow Index. The RSI only incorporates prices into its equation.
The Money Flow Index was developed by Marc Chaikin and can show the development of possible reversal in trend when it diverges from the information presented in a price chart. If the Money Flow Index is trending downward, but the price chart is trending up, the indicator is saying that something could be ready to change.
The Money Flow Index has an 80 line and a 20 line. When the MFI approaches or breaks the 80 line, it signals a high position that could be the peak of a trend. When the MFI approaches or breaks the 20 line, it signals a low position that could be the end of a trend.
Money Flow info by BetterTrades Charts
The Money Flow Index can do a good job uncovering oversold and overbought positions, but the numbers can be distorted if the midpoint is missing. It can be used as part of the technical analysis process, but should not be used as the only basis for entering or exiting a trade.
