Money Flow Index (MFI): Indicator Guide
The Money Flow Index, or MFI, is a volume-weighted cousin of RSI. It compares trading on up days with trading on down days, on a scale from 0 to 100. Over 80 is called overbought and under 20 is called oversold. Both labels describe recent trading; they do not tell you what the stock does next.
What It Shows
MFI asks whether a price move has real trading behind it. RSI looks only at price changes. MFI multiplies each day's typical price by that day's volume, so a rise on heavy trading counts for more than a rise on thin trading.
"Money flow" here is a label for how much trading happened on up days versus down days. No cash goes into or out of the company.
How It's Calculated
For each day, find the typical price (high plus low plus close, divided by 3) and multiply it by volume. The result is that day's raw money flow. If the typical price rose from the day before, the flow counts as positive. If it fell, the flow counts as negative.
Add up the positive flows and the negative flows over the last 14 days. Divide positive by negative to get the money ratio, then MFI = 100 − 100 ÷ (1 + ratio).
For a worked example, use made-up numbers: positive flow of $600 million and negative flow of $400 million give a ratio of 1.5. MFI = 100 − 100 ÷ 2.5 = 60, which sits in the middle zone.
How to Read It
Try these three readings. Each describes recent flow, and none predicts the next move.
- The two zones. Over 80 means most of the recent money flow came on up days. Under 20 means most of it came on down days. These are labels for strong recent flow.
- Volume-backed divergence. Because volume is included, a divergence can say more than the same divergence on RSI. If price makes a new high while MFI does not, the move had less trading behind it, which is a reason to look closer.
- Next to RSI. Put the two side by side. If RSI is high but MFI is not, the price rose without much trading behind it.
Where It Misleads
MFI needs volume data, so it cannot be drawn on a line chart. The app does not draw it there and tells you to switch to Candlestick or OHLC.
Stocks that trade very few shares can give erratic readings, because one busy day dominates the 14-day window. Like RSI, MFI can sit above 80 for weeks in a strong uptrend, so a high reading is not proof the move is over.
Settings in Rapunzl
| Setting | Default | Range |
|---|---|---|
| Period | 14 | 2 to 400 |
Period is the number of days of money flow that are compared. A shorter period is jumpier. A longer period is calmer and slower to react. The unit is whatever one candle covers: on a 5-minute chart, 14 means 14 five-minute candles of money flow.
Try It in Rapunzl
Volume matters here as much as each day's high, low and close, so open a stock's chart and choose Candlestick or OHLC first. Then open Customize Chart → Chart Indicators → Advanced Indicators and add Money Flow Index. Next, open Basic Indicators, add Relative Strength Index and compare the two panels. Rapunzl Premium includes the Money Flow Index study on charts.
In Rapunzl's Stock Scanner, "Money Flow Index 14" is a field in the Momentum group: RSI weighted by volume, 0 to 100. The field is free. Add it as a filter and look at the stocks it lists as stocks to study, not picks; overbought and oversold only describe recent flow.
A 15-Minute Class Activity
Match the Flow Cards. Students work in pairs with a calculator and six slips of paper. Every dollar figure below is made up.
- 3 minutes. Describe two made-up stocks that each rose $2 over five days. Stock X rose on heavy volume and Stock Y on very light volume. Ask which rise looks more convincing and why.
- 5 minutes. Pairs write three flow cards: positive $600 million with negative $400 million, positive $900 million with negative $100 million, and positive $100 million with negative $900 million. They confirm the first gives a ratio of 1.5 and an MFI of 60, then work out the other two. The ratio for the second is 9 and its MFI is 90. The third is 10.
- 4 minutes. On three more slips, pairs write the labels middle zone, overbought and oversold. They match each flow card to its label: 60 is middle, 90 is overbought and 10 is oversold.
- 3 minutes. Discuss why MFI could tell a different story from RSI over the same days. Each student writes one sentence as an exit ticket.
Related Indicators
- RSI: the price-only study that MFI adds volume to.
- Trading volume: the share count that MFI multiplies into each day's flow.
- Williams %R: a range gauge built from highs, lows and closes, with no volume in it.
- Stochastic Oscillator: another 0 to 100 panel, based on where the close sits in its range.
Frequently Asked
Questions
It compares trading on up days with trading on down days over a set number of days, on a scale from 0 to 100. Each day's typical price is weighted by that day's volume.
RSI uses price changes only. MFI also counts volume, so a rise on heavy trading moves it more than the same rise on thin trading.
Over 80 is called overbought and under 20 is called oversold. They mark strong recent flow on up days or down days, not a prediction.
Volume is part of the formula, and a line chart carries closing prices only. Switch to Candlestick or OHLC to use the study.
No. The "Money Flow Index 14" field in Rapunzl's Stock Scanner is free. The MFI chart study is part of Rapunzl Premium.
Teach Volume Reading With Rapunzl
Volume is easier to grasp when students can see it on a chart. Request a demo to bring that to your class. Families curious about indicators at home can start on our parents page.
Indicators, patterns and examples in this article are for education and are not investment advice or a recommendation to buy or sell any security.
By Nate Thomas, School Partnerships Lead at Rapunzl.