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Written by Administrator
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Tuesday, 12 June 2007 |
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The Money Flow Index (MFI) or the Chaikin Money Flow (CMF) is a momentum indicator that is similar
to the Relative Strength Index (RSI) in both interpretation and
calculation. However, MFI is a more rigid indicator in that it is
volume-weighted, and is therefore a good measure of the strength of
money flowing in and out of a security. It compares "positive money
flow" to "negative money flow" to create an indicator that can be
compared to price in order to identify the strength or weakness of a
trend. Like the RSI, the MFI is measured on a 0 - 100 scale and is
often calculated using a 14 day period.
The MFI can be used to
determine if there is too much or too little volume associated with a
security. A stock is considered "overbought" if the MFI indicator
reaches 80 and above (a bearish reading). On the other end of the
spectrum, a bullish reading of 20 and below suggests a stock is
"oversold". 
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