MFI: typical-price flow ratios and volume assumptions
The Money Flow Index combines typical-price changes with candle volume to produce a bounded oscillator.
Before this lesson
These lessons provide background; you can still read this page now.
What the indicator measures
The Money Flow Index combines typical-price changes with candle volume to produce a bounded oscillator. Its “money flow” is a formula label. It does not observe account deposits, withdrawals or actual capital entering a market. Comparisons depend on the volume units and quality supplied by the selected venue.
Calculation and units
Raw flow = HLC3×volume. Assign that flow to the positive sum when HLC3 rises from the previous bar, or the negative sum when it falls; equal HLC3 contributes to neither. Money ratio = positive/negative flow, and MFI = 100 − 100/(1+ratio), using the selected rolling window.
Worked educational example
Given positive flow sum 300 and negative sum 100, the ratio is 3 and MFI is 75. This need not mean that three buyers existed for every seller. Both sides participate in every matched transaction, while the formula assigns a whole candle according to a representative-price change.
Reading it without overclaiming
The 80/20 references describe oscillator regions and can persist in trends. A divergence needs consistently chosen pivots and cannot identify a future turn by itself. Zero or incomplete volume makes the input less informative, even if a number is still displayed. Check the underlying data before interpreting an extreme.
How TradingHub implements it
TradingHub defaults to period 14 with upper 80 and lower 20. It needs a prior typical-price comparison in addition to the window. The native routine returns 100 whenever negative flow is zero, including when both sums are zero. That edge case must not be presented as proven buying pressure.
Comparisons that matter
RSI uses average gains/losses without this volume weighting; OBV signs volume from close changes and accumulates it. These transformations can disagree. Keep source, timeframe, window and volume coverage fixed before deciding whether the difference reflects a real change in the observed market.
A reproducible chart review
Open the existing Trading chart and choose the same market, interval and closed observation time as your comparison. Record every calculation parameter before changing one at a time. Match source fields, history length and the bar window. Native indicators calculate from the supplied visible slice; Indicator Studio calculates from its available chart snapshot. A difference after panning may therefore be a window or warmup effect rather than a new market event.
Limits and next lesson
The illustration uses constructed candles, not a dated market observation or a backtest. A live candle can change until it closes. Missing history, volume units and implementation conventions limit comparisons. No indicator guarantees a direction, an execution price or protection from loss. Use the related lessons to separate definitions, observed values and possible explanations; a correct quiz records learning progress, not trading competence.
Knowledge check
Does MFI directly measure new capital deposited into an exchange?
- No; its flow is derived from typical price and candle volume
- Yes; it reads exchange account balances
- Yes; MFI 75 means 75% new money
Show explanation
The calculation has no access to account transfers or complete market-wide capital flows.
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Primary sources and scope
Educational scenarios are not execution guarantees, forecasts or personal recommendations. Check current product rules at their source.
Content revised: . Editorial responsibility: TradingHub. No independent professional certification is claimed.