Normalizing Twiggs Money Flow with a Rolling Standard Deviation

Summary

The document describes a normalized version of Twiggs Money Flow intended to show where the current indicator reading sits within its recent distribution. It first calculates buying and selling pressure from the close relative to a true range built from the current high and low and the previous close. The pressure is weighted by volume, smoothed with exponential averages, and divided by smoothed volume to produce the money flow series.

It then uses a 200-period average and standard deviation to form bands two standard deviations above and below the average. The current reading is scaled so the lower band maps to 0, the midpoint to 50, and the upper band to 100; the author says the measure can help identify divergence. The document provides a formula, but no charts, tests, or performance evidence. Thresholds and lookback parameters can be changed, and readings outside the 0–100 scale are possible. The stated interpretation depends on the selected history and does not establish that divergence predicts profitable trades.

Key ideas

• Twiggs Money Flow weights close-based buying and selling pressure by volume.
• The calculation smooths money flow and volume before dividing one by the other.
• A rolling average and standard deviation define the normalization bands.
• The scale maps the lower band to 0, the midpoint to 50, and the upper band to 100.
• The author proposes using the indicator to assess divergence, without presenting performance evidence.

Tags

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