Money Flow Index (MFI)
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Definition
MFI is a volume-weighted RSI: a bounded 0-100 oscillator that uses typical price and volume to measure buying vs. selling pressure over a lookback (default 14). It is often called the 'volume RSI'.
How to read it
Above 80 is conventionally overbought and below 20 oversold (more extreme bands than RSI's 70/30 because volume amplifies the signal). Rising MFI indicates money flowing in (accumulation); falling MFI indicates money flowing out (distribution). Because it incorporates volume, MFI can lead price at turning points where volume dries up or surges before price reacts.
How practitioners use it
Used as context among multiple indicators — never as a standalone signal to act.
Less common professional uses
Like all oscillators MFI stays pinned at extremes in strong trends; the 80/20 fade is a classic failure mode in trending, high-participation names. MFI depends on clean volume; on instruments with poor or fragmented volume data the signal degrades, and single volume spikes can jerk the reading. MFI divergence tends to be earlier than RSI divergence because it captures fading volume before it shows in price - useful as a leading warning but requires price confirmation.
Sources & provenance
Quong & Soudack 1989
This page is educational content published by Pachira Aquatica Global LLC. It is not investment advice and not a recommendation.