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Overview
The Money Flow Index ("MFI") is a momentum indicator that measures the strength of money
flowing in and out of a security. It is related to the
Relative Strength Index, but where the RSI only incorporates prices,
the Money Flow Index accounts for volume.
Interpretation
The interpretation of the Money Flow Index is as follows:
Look for divergence between the
indicator and the price action. If the price trends higher and the MFI trends lower
(or vice versa), a reversal may be imminent.
Look for market tops to occur when the MFI is above 80. Look for market bottoms to
occur when the MFI is below 20.
The above excerpt courtesy of Marketscreen.com and "Technical Analysis From A to Z" by Steven B. Achelis which was the inspiration for this website.
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