Bill Williams Profitunity: Reading Price Movement Against Volume
Summary
The document explains the Market Facilitation Index (MFI), calculated as a bar’s high-low range divided by volume. It compares each bar’s MFI and volume with the prior bar to classify activity into four states: Green, Fade, Fake, and Squat. The accompanying indicator code marks these states on price bars, with additional conditions using candle direction and position relative to the bar midpoint.
Green combines rising MFI and volume and is described as directional activity with new participation. Fade reflects declines in both measures and may occur as interest wanes. Fake pairs rising MFI with falling volume, suggesting price movement without broader participation. Squat combines rising volume with falling MFI, indicating heavy activity but limited price progress; it may precede a move, though its direction is unresolved until a later breakout. The notes frame these readings as context, not standalone signals, and give no performance tests or evidence that the interpretations predict returns. The indicator is said to apply across daily to monthly bars.
Key ideas
- MFI measures a bar’s price range relative to its volume.
- Comparing current MFI and volume with the previous bar creates four activity labels.
- Green bars indicate increases in both MFI and volume, while Fade bars show decreases in both.
- Fake bars combine higher MFI with lower volume, and Squat bars combine lower MFI with higher volume.
- A Squat may precede a significant move, but the document says its direction depends on the subsequent breakout.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.