Money Flow Index (MFI) is the indicator, which indicates the rate at which money is invested into a security and then withdrawn from it.
Construction and interpretation of the indicator is similar to Relative Strength Index with the only difference that volume is important to MFI.
When analyzing the money flow index one needs to take into consideration the following points:
- Divergences between the indicator and price movement. If prices grow while MFI falls (or vice versa), there is a great probability of a price turn;
- Money Flow Index value, which is over 80 or under 20, signals correspondingly of a potential peak or bottom of the market.
This version has additional JMA smoothing added to it in order to be able to identify and assess trend changes.
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