MFI (Money Flow Index) explained

Volume

What MFI measures

MFI is a volume-weighted RSI that uses both price and volume data to identify overbought/oversold conditions. It measures the buying and selling pressure behind price moves by weighing price changes by their volume. An RSI signal backed by high volume (confirmed by MFI) is more reliable than an RSI signal on low volume.

How MFI readings are interpreted

MFI above 80 suggests high money flow into the asset (potential overbought). Below 20 suggests strong outflows (potential oversold). When price is rising but MFI is falling, there's a bearish divergence — the rally lacks volume support. MFI is particularly useful for spotting distribution (smart money selling into retail buying).

Conventional MFI levels

Above 80: Heavy money inflow — overbought with volume
Below 20: Heavy money outflow — oversold with volume
Divergence: price rises but MFI falls = distribution, weakness ahead
Divergence: price falls but MFI rises = accumulation, strength ahead
50 level: bullish above, bearish below

Where MFI works, and where it does not

Particularly valuable for stocks with predictable volume patterns (US equities with pre/post-market data) and futures. Less reliable for crypto where volume data quality varies. Works best on daily and 4H charts. In low-volume environments, MFI becomes erratic.

Indicators commonly read alongside MFI

RSI: MFI and RSI both oversold = confirmed low on high volume
OBV: Both MFI and OBV confirming same direction = very strong signal
Bollinger Bands: Price at lower band + MFI oversold = strong reversal setup

Known limitations of MFI

Volume data quality matters enormously — unreliable volume = unreliable MFI
MFI and RSI often agree; when they diverge, pay attention to which has better context
Pre-market and after-hours volume can distort MFI for stocks

MFI in practice

MFI is commonly used to confirm or challenge RSI — both oversold together is treated as a stronger reading than either alone
Hidden bullish divergence, where price makes a lower low but MFI a higher low, is conventionally read as trend continuation
A sustained reading below 20 accompanied by volume is widely described as an accumulation zone
Across timeframes, daily oversold with a shorter timeframe turning up is the configuration usually watched for timing

Other volume indicators

OBV — On-Balance Volume
CMF — Chaikin Money Flow
VWAP — Volume Weighted Average Price
Anchored VWAP

Testing ideas built on MFI

A reading of MFI can be written as an exact rule and checked against historical data — as a full strategy with entries, exits and costs, or as a single condition and what followed it:

How to backtest a trading strategy without code
Event analysis: what follows a market event

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.