Using Market Facilitation Index Changes and Volume to Build Signals
Summary
The article explains the Market Facilitation Index (MFI) as a measure of price movement relative to volume, emphasizing changes between adjacent bars rather than absolute indicator levels. It classifies bars by whether MFI and volume rise or fall together: the resulting colors are used to describe stronger participation, fading activity, and other price-volume relationships. It also compares tick volume with traded volume, noting that tick counts are widely available in decentralized forex markets but can be noisy and vary across brokers.
Several rule-based patterns combine MFI colors with price and other indicators. A green bar aligned with price above or below a moving average is presented as trend confirmation; a pink bar is used to identify fading pressure or possible divergence; other patterns incorporate additional indicators. The article reports tester runs on EUR/JPY for a limited period and timeframe, but the supplied text omits much of the pattern discussion and detailed results. It recommends evaluating patterns individually, and the examples are implementation demonstrations rather than evidence of robust out-of-sample performance.
Key ideas
- MFI is interpreted through changes in adjacent readings and volume, rather than fixed absolute thresholds.
- Tick volume can stand in for unavailable traded volume in forex, but it is noisy and broker-dependent.
- A green MFI bar combined with price relative to a moving average is used as a trend-confirmation rule.
- A pink bar can signal weakening participation and possible divergence or trend exhaustion.
- The article favors testing individual patterns before combining them, while its reported backtests are limited.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.