MFI (The Money Flow Index)
The Money Flow Index (MFI) is a technical oscillator that uses price and volume to identify overbought or oversold zones.
The indicator oscillates between 0 and 100 and can be used for spotting divergences that warn of a potential change in price.
A divergence is when the oscillator is moving in the opposite direction of price. This is a signal of a potential reversal in the prevailing price trend.
The overbought and oversold levels are also used to signal possible trading opportunities.
Moves below 10 and above 90 are rare. Traders watch for the MFI to move back above 10 to signal a long trade, and to drop below 90 to signal a short trade.
Unlike the Relative Strength Index (RSI), the Money Flow Index includes both price and volume whereas RSI is based just on price. This is the reason why MFI is also known as the volume-weighted RSI.