Money Flow Index: Calculation and Indicator-Based Trading Rules

Summary

This educational article explains the Money Flow Index (MFI), a volume-based oscillator that combines price and volume to estimate buying and selling pressure. It outlines the manual calculation: derive typical price, multiply by volume for raw money flow, classify flows by whether typical price rose or fell, sum positive and negative flows over a period, and convert their ratio to an index between zero and 100. It also notes that a platform’s built-in indicator can be used instead of calculating values by hand.

The article presents simple rule sets using overbought and oversold thresholds, MFI levels as entry and take-profit triggers in rising or falling conditions, and comparisons between successive MFI and price highs or lows to identify possible trend strength or divergence. It sketches how to translate these rules into automated MQL5 systems. The rules are introductory examples rather than validated strategies: the author explicitly advises testing and adjusting them, and provides no performance results or evidence that the thresholds generalize across instruments or market regimes.

Key ideas

• MFI combines typical price and volume to estimate buying and selling pressure on a zero-to-100 scale.
• Its calculation separates raw money flow into positive and negative periods before forming a ratio.
• The article uses values near 20 and 80 as oversold and overbought guides.
• It proposes MFI thresholds and price comparisons as simple signal rules for trend strength and divergence.
• The rules are educational examples that require testing and may need adjustment or combination with other tools.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.