MFI is designed to capture buying or selling strength by monitoring the total dollar
value of shares traded. Dollar volume on an up day is interpreted as buying strength,
and on a down day to represents.
The Money Flow Index is a bounded Oscillator with reading between 0 and 100. Overbought
and oversold areas are considered above 80 and below 20. By watching for divergences
between MFI and the underlying price action, traders can spot trend reversals.
The Money Flow Index is good indicator for those investors and traders believe that
volume is the key to spotting emerging trends. The MFI is designed to monitor money
flows into and out of stocks. As a momentum oscillator tied to volume, the Money
Flow Index (MFI) is best suited to identify reversals and price extremes. As with
all indicators, it is recommended that traders and investor use multiple indicators
to confirm buy and sell signals. Most importantly traders and investors need keep
in mind is that price action should always dictate decisions and indicators should
be used to confirm them.