What Is the Money Flow Index (MFI)? RSI With Volume
RSI with volume, from 0 to 100: days with more volume count for more. Below 20 is usually called oversold and above 80 overbought.
Contents (6 sections)
The Money Flow Index is often described as RSI with volume. Like RSI it runs from 0 to 100 and is read at its extremes; unlike RSI, a day counts for more when more shares traded. A rise on heavy volume moves MFI further than the same rise on thin volume.
How it is calculated
- Typical price for a day is the average of the high, the low and the close.
- Money flow for the day is the typical price times the volume.
- A day whose typical price is higher than the day before counts as positive money flow; a lower one counts as negative.
- Over 14 days, add up the positive flows and the negative flows. MFI is 100 times the positive total divided by the sum of both.
So an MFI of 80 means that, of all the money that changed hands over 14 days, about four fifths did so on days the price rose.
Rules of thumb
| MFI(14) | What it usually means |
|---|---|
| Above 80 | Overbought: buying on volume has dominated |
| 20 to 80 | No extreme |
| Below 20 | Oversold: selling on volume has dominated |
A divergence, price making a new high while MFI makes a lower one, says the latest rise came on less volume than the one before.
How it differs from RSI
RSI looks at the size of price changes only. MFI adds volume. The two usually agree. They part when volume is unusual: a sharp fall on very heavy volume drives MFI lower than RSI, and a drift upward on thin volume lifts RSI more than MFI.
What it does not tell you
- Who is buying. "Money flow" is a name. Every share bought was also sold; MFI records on which kind of day the volume appeared, not where money came from.
- That an extreme will reverse. In a strong trend MFI stays above 80 or below 20 for a long time, as RSI and KDJ do.
- Much on a stock with erratic volume. One day of very heavy trading dominates the 14-day sum.
In Stock Compass
The rule indicator is mfi_14, under Volume & Money Flow, on daily bars over 14 days. It is used the way RSI is: a reading below 20 as one condition of a pullback rule, alongside a trend filter, or a reading above 80 as a reason to wait. Using both RSI and MFI in one rule mostly repeats the same condition; choose MFI when you want volume to count. Turn your logic into buy rules shows how conditions are combined and tested.
FAQ
Is MFI better than RSI?
It answers a slightly different question. MFI weights each day by its volume, so it reacts more to moves that many shares took part in. Neither has a clear record of being more reliable; the choice is whether you want volume in the measure.
Does a high MFI mean money is flowing into the stock?
Only in a loose sense. For every buyer there is a seller, so money does not flow in or out. A high MFI means most of the recent trading volume occurred on days when the price rose.
What settings does Stock Compass use for MFI?
Fourteen days on daily bars, with the typical price as the average of high, low and close. The conventional levels are 20 and 80.
Definition only — not investment advice.