Normalizing the Money Flow Index with Bollinger Bands

Summary

This indicator transforms the Money Flow Index (MFI) by locating its value within Bollinger Bands calculated on the MFI series itself. The normalized reading is the distance from the lower band divided by the width between the upper and lower bands. The document identifies four configurable inputs: the MFI period, the volume series used by MFI, the Bollinger Band period, and the band deviation.

The stated purpose is to help assess overbought and oversold zones. The normalization expresses MFI relative to its recent band range, rather than presenting the raw MFI alone. The document includes no entry or exit rules, threshold recommendations, backtest, or evidence that the transformation improves trading results. It is therefore an indicator definition that would require independent testing and interpretation in a broader strategy.

Key ideas

• The indicator applies Bollinger Bands to the Money Flow Index series.
• It scales MFI according to its position between the lower and upper bands.
• The calculation depends on separate settings for MFI and the Bollinger Bands.
• The proposed use is identifying overbought and oversold conditions.
• No trading rules or performance evidence are provided.

Tags

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