Technical indicator MFI (Money Flow Index - an indicator of money flow) will let you know the amount of money in and out when investing in a security during a period of observation. In other words, the MFI indicator shows how much investors prefer a particular type of stock or currency.

To add MFI indicator on mt4, go to Insert -> Indicators -> Volumes -> Money Flow Index:


The construction and analysis of this index are very similar to the RSI (Relative Strength Index), but RSI is related to the stock price and the MFI is the relationship to the volume of securities traded. When analyzing money flow based on the MFI indicator, you need to pay attention to the following issues:
  • The divergence between the indicator and the price movement. If the price rises while the MFI falls (or vice versa), it is very likely that the price will reverse;
  • If the MFI goes above 80 or below 20, the market is likely to top or bottom. You should sell when the MFI is above 80 and buy when the MFI is below 20 or sell when the MFI shows a down signal and buy when the MFI is up if a short trade.

MFI calculation

To calculate the MFI you need to take a few steps. First, determine the typical price (TP) of the period of interest:

TP = (HIGH + LOW + CLOSE) / 3

Then calculate the amount of cash flow (Money Flow - MF):

MF = TP * VOLUME

If the typical price today is higher than yesterday, the cash flow will be positive, otherwise, if today's price is lower than yesterday, the cash flow will be negative. Positive cash flows are the sum of positive cash flows over a given period, similar to negative cash flows. Next, calculate the rate of money (Money Ratio - MR):

MR = Cash Flow (PMF) / Negative Cash Flow (NMF)

Finally, use the monetary ratio to work out the MFI:

MFI = 100 - (100 / (1 + MR))