Money Flow index (MFI) and deciding when money flow is positive or negative?
How do you interpret the Money Flow Index?
The Money Flow Index (MFI) is a technical indicator that generates overbought or oversold signals using both prices and volume data. An MFI reading above 80 is considered overbought and an MFI reading below 20 is considered oversold,1 although levels of 90 and 10 are also used as thresholds.
How do you read a crypto MFI?
As shown in the MFI chart, a reading above 80 means that Bitcoin (BTC) is oversold and a price reversal to the downside can be expected. However, if you go back a little, when BTC was in the 40k range, the MFI indicator had a reading of 20 which meant that BTC is undersold both in terms of price and volume.
What is the best money flow indicator?
The reason Chaikin Money Flow is the best volume and a classical volume indicator is that it measures institutional accumulation-distribution. Typically on a rally, the Chaikin volume indicator should be above the zero line. Conversely, on sell-offs, the Chaikin volume indicator should be below the zero line.
Is MFI a leading indicator?
Like other volume-based indicators, the MFI is considered a leading indicator, so it is used to predict price movements. The MFI is related to the relative strength index (RSI), as both identify overbought and oversold conditions.
Is RSI or MFI better?
As you can see from the table above, the MFI indicator produced better results than the standard RSI over a holding period of three days. The buy signal MFI(8) < 30 produced the best results with an average profit of 0.3% per trade, a win rate of 52.66% and a profit factor of 1.18 from a large sample of 232,589 trades.
How is MFI used in trading?
MFI rises slightly but remains below 80. 4. MFI drops lower than its previous low is a signal to short sell or profit booking.
Buying with MFI
- MFI drops below 20 and enters inside oversold zone.
- MFI bounces back above 20.
- MFI pulls back but remains above 20.
- A MFI break out above its previous high is a good buy signal.
What is the best volume indicator?
The 6+ Best Volume Indicators in Day Trading
- VWAP.
- Volume-Weighted Moving Average (VWMA)
- Money Flow Index (MFI)
- Accumulation and distribution indicator.
- Klinger Oscillator.
- On Balance Volume (OBV)
- Other volume indicators.