# Money Flow Index

## Introduction

The Money Flow Index (MFI) is volume based momentum indicator that uses price and volume based on many of the concepts used in the accumulation distribution indicator. The MFI indicator is based on analysing volume strength or weakness. Strong volume is used to confirm price trends and low volume is used to signal that momentum is weakening which could result in a trend reversal. The MFI is used to spot overbought and oversold areas. Trend reversals are typically identified by divergences between the oscillator and underlying price action.

## Calculation

1. Calculate Typical Price
Typical Price = (high+low+close)/3
2. Calculate Money Flow
Money Flow = typical price x volume
3. Calculate Positive Money Flow
*Positive Money Flow = Sum of positive Raw Money Flow over N periods
4. Calculate Negative Money Flow
*Negative Money Flow = Sum of Negative Raw Money Flow over N periods
5. Calculate Money Ratio
Money Ratio = (positive money flow)/(negative money flow)
6. Calculate Money Flow Index
Money Flow Index = 100/(1+money ratio)

Where:

* Positive money flow is the total for days where the typical price is higher than the previous day's typical price.* Negative money flow is the total for days where the typical price is lower than the previous day's typical price.

Unchanged days from typical price are discarded.