💸 MFI — Money Flow Index
MFI is often described as "volume-weighted RSI": it applies RSI's gain/loss ratio logic not to raw price changes, but to money flow — typical price multiplied by volume — so a move only counts as strongly as the activity behind it.
💡 Financial Meaning
A price rise on heavy volume produces a much larger positive money flow than the same percentage rise on thin volume. MFI captures that distinction, which plain RSI cannot see at all. Like RSI, it is read with overbought/oversold thresholds, but a reading above 80 means buying pressure has been both persistent and well-supported by volume — arguably a stronger signal than an RSI overbought reading alone.
🔢 Mathematical Formulas
-
Typical Price and Raw Money Flow for each bar:
\[ TP_t = \frac{H_t + L_t + C_t}{3}, \qquad RMF_t = TP_t \cdot V_t \] -
Positive/negative flow, split by the direction of the typical price versus the previous bar:
\[ PMF_t = RMF_t \text{ if } TP_t > TP_{t-1} \text{ else } 0, \qquad NMF_t = RMF_t \text{ if } TP_t < TP_{t-1} \text{ else } 0 \] -
Money Flow Ratio over the window, and its normalisation into the MFI:
\[ MFR_t = \frac{\sum_{i=0}^{N-1} PMF_{t-i}}{\sum_{i=0}^{N-1} NMF_{t-i}}, \qquad MFI_t = 100 - \frac{100}{1+MFR_t} \]
⚙️ Parameters
| Parameter | Key | Default | Description |
|---|---|---|---|
| Period (\(N\)) | period |
14 | Lookback window for accumulating positive/negative money flow, in sessions. |
| Overbought | overbought |
80 | Threshold for the overbought zone. |
| Oversold | oversold |
20 | Threshold for the oversold zone. |
🎛️ Signal Processing Equivalent — Volume-Weighted Duty Cycle
MFI reuses RSI's exact normalisation, \(100 - 100/(1+x)\), but replaces RSI's unweighted gain/loss sums with volume-weighted ones. In signal-processing terms, this is the same duty-cycle / saturation detector described for RSI, except the rectified positive and negative half-waves of price change are each amplitude-modulated by volume before accumulation — volume acts as a per-sample weighting (gain) applied to the rectified derivative.
flowchart LR
HLC["📈 High / Low / Close"] --> TP["🎯 Typical Price"]
TP --> DIR["➕➖ Direction vs previous TP"]
V["📦 Volume"] --> RMF["💰 Raw Money Flow = TP × V"]
TP --> RMF
DIR --> SPLIT["🔀 Positive / Negative flow"]
RMF --> SPLIT
SPLIT --> SUMN["🔁 Sum over N bars"]
SUMN --> RATIO["📐 Money Flow Ratio"]
RATIO --> MFI["💸 MFI = 100 − 100/(1+MFR)"]MFI vs RSI
Feed MFI the exact same close-price pattern as RSI but with volume spiking on the up-moves and thinning on the down-moves, and MFI will read higher than RSI — the volume weighting tilts the ratio in favour of the better-supported direction.