November 11, 2025
4 mins read
If you’ve ever stared at a stock chart and thought, “Okay, but are people actually buying this thing or just pushing the price around?” — that’s exactly where the Money Flow Index (MFI) comes in.
The MFI is a momentum indicator that mixes price and volume to tell you whether money is really flowing into or out of a stock. That’s the difference between this and the more popular RSI, which looks at only price. With MFI, you’re basically checking if the hype is backed by real buying or if it’s just noise.
For you, as a trader or even a long-term investor, MFI is super handy. It can confirm the strength behind a trend, and sometimes — if you’re paying attention — it gives you early hints of a reversal. Imagine spotting that before everyone else.
Think of MFI as a lie detector for price action. Price might say, “I’m going up!” but unless volume agrees, you can’t trust it. The MFI shows you whether buyers are genuinely pushing money in or sellers are quietly pulling it out.
It works on a 0–100 scale. Above 80? Overbought — meaning too many people have piled in, and a pullback could be coming. Below 20? Oversold — everyone’s dumping, and it might be close to bottoming out.
And here’s the kicker: divergences. If price goes one way but the MFI goes the other, that’s your clue that momentum is shifting. When you see that, you’ll feel like you’ve unlocked a cheat code.
Now, I know what you’re thinking — “Do I really have to calculate this myself?” Not unless you love spreadsheets. Most trading platforms do it for you. But understanding how it’s built makes you use it better.
Typical Price = (High + Low + Close) ÷ 3
This gives you the average price for the day.
Raw Money Flow = Typical Price × Volume
Simple multiplication, but it brings volume into play.
Positive vs Negative Money Flow
If today’s typical price is higher than yesterday’s, it’s positive flow. If it’s lower, it’s negative.
Money Flow Ratio = Positive ÷ Negative
MFI = 100 – [100 ÷ (1 + Ratio)]
Once done, you’ve got your MFI reading. Again, don’t sweat the math — but do remember the logic: price + volume = conviction.
Here’s where things get exciting. The MFI doesn’t just throw numbers at you — it tells a story if you listen.
Overbought (>80)
You see MFI above 80? That’s like a red flag waving: “Too many buyers in the pool.” Could mean a correction’s around the corner.
Oversold (<20)
MFI under 20? Selling pressure has been intense. But often, that’s where rebounds sneak in.
Bullish Divergence
Price makes a new low, but MFI moves up. Translation? Selling is losing steam. Possible reversal ahead.
Bearish Divergence
Price climbs higher, MFI dips lower. Buying energy is fading. Be cautious.
Trend Confirmation
Rising price + rising MFI = strong uptrend. Falling price + falling MFI = strong downtrend. You get a clearer picture.
Volume Confirmation
Unlike RSI, MFI shows whether volume is backing the move. Think of it as double-checking the market’s pulse before you commit.
So, why should you bother adding another indicator to your already messy chart? Because MFI gives you context you’d otherwise miss.
Combines price and volume – It’s not just “what’s the price doing?” It’s also “is money backing it up?”
Pinpoints overbought/oversold zones – Helps you avoid chasing rallies or panic-selling bottoms.
Highlights divergences – You get a heads-up before trends reverse.
Confirms trend strength – Reinforces your confidence when you’re already in a trade.
Gives volume insights – Shows how much conviction traders really have.
Works across timeframes – Whether you’re day trading or holding longer, you can tweak it to fit your strategy.
Now, I won’t sugarcoat it. MFI has flaws, and if you rely on it blindly, you’ll trip up.
Lagging nature – It reacts to past data, so signals may come late.
False alerts in sideways markets – You’ll often get tricked in choppy conditions.
Over-reliance on 80/20 levels – Assets can stay “overbought” or “oversold” for ages in strong trends.
Volume distortions – One-off events or unusual volume spikes can mess up readings.
Needs backup – Works best when paired with RSI, MACD, or chart patterns.
So yes, use MFI, but never in isolation.
Aspect | Money Flow Index (MFI) | Relative Strength Index (RSI) |
Core Calculation | Combines both price and volume. | Uses only price changes. |
Data Used | Price + volume = holistic. | Price only. |
Range | 0–100 (80 = overbought, 20 = oversold). | 0–100 (70 = overbought, 30 = oversold). |
Volume Consideration | Yes, includes volume. | No. |
Trend Confirmation | Confirms if price moves are backed by money flow. | Shows momentum but without volume context. |
Divergence | Very effective for spotting reversals. | Works too, but less nuanced. |
Suitability | Better for volume-heavy, trending markets. | Useful in both trends and ranges. |
Complexity | A little more complex. | Simpler. |
Here’s the deal: the Money Flow Index isn’t magic, but it adds an important layer of reality to your analysis. It makes you ask, “Is money actually flowing into this stock, or is price just faking it?”
When you combine MFI with other tools — say RSI or MACD — you’re not just guessing anymore. You’re stacking evidence. And as a trader, that’s what you want: conviction.
If you’re new, play around with it in paper trading first. Watch how it behaves around the 80/20 levels, and pay attention to divergences. With time, you’ll start trusting it as one of your go-to checks before making a move.
Because at the end of the day, trading is less about guessing and more about stacking the odds in your favour. And MFI? It’s one more way to do that.
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The Money Flow Index is an oscillator of momentum which employs price and volume to evaluate buying and selling pressure, assisting traders to recognise overbought and oversold positions and predict impending price reversals in the market.
The MFI is calculated by taking the typical price of a stock (average of high, low, and close) and multiplying it by volume, then comparing positive and negative money flow over a set period.
MFI values above 80 suggest overbought conditions, while values below 20 suggest oversold conditions, indicating possible trend reversals.
The MFI differs from the RSI by incorporating both price and volume in its calculations, offering a broader view of market sentiment. In contrast, the RSI relies solely on price movement to identify overbought or oversold conditions.
Yes, the MFI can be used for intraday trading as it helps identify overbought and oversold conditions, providing early signals for possible price reversals. Its volume-based analysis adds depth to intraday decision-making and trend confirmation.
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