Smoothed Money Flow Index for Volume-Aware Reversal Analysis
Summary
The Money Flow Index is presented as a volume-aware momentum oscillator, similar in construction and interpretation to the Relative Strength Index. It combines price movement with volume to indicate the pace of money flowing into or out of a security.
The document describes two common readings: divergence between price and MFI may warn of a possible turn, while readings above 80 or below 20 are treated as potential market peaks or bottoms. This version adds JMA smoothing to help assess trend changes. These are indicator heuristics, not evidence of reliable forecasts; the description provides no testing, asset-specific calibration, or rules for entries, exits, and risk management.
Key ideas
- MFI incorporates volume, unlike the similarly interpreted RSI.
- A divergence between price and MFI is described as a possible reversal warning.
- Readings above 80 or below 20 are presented as potential extremes.
- JMA smoothing is added to help identify changes in trend.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.