Money Flow Index: RSI weighted by the volume behind each move

What it measures

MFI applies the RSI construction to money flow — price multiplied by volume — instead of to price alone. The result is a momentum oscillator that only counts a move as strong if volume backed it.

That single change is what makes MFI worth having alongside RSI rather than instead of it: the two disagreeing is information.

It also makes MFI blunter. Volume is counted per bar and assigned entirely to one side based on whether the typical price rose or fell, so a heavily traded bar that closed a fraction higher contributes all of its volume as buying. The indicator measures conviction at bar resolution, not at trade resolution.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   For each bar, compute the typical price — the average of high, low and close.

2. 2

   Multiply typical price by volume to get raw money flow.

3. 3

   Classify each bar as positive or negative depending on whether its typical price rose or fell against the previous bar.

4. 4

   Sum positive and negative money flow separately over the lookback, take the ratio, and map it onto 0–100 the same way RSI does.

Settings

Fourteen matches RSI, which makes the two directly comparable — and comparing them is the point. Changing one without the other removes the main use of having both, because the divergence you would be reading could come entirely from the different windows rather than from volume. If you shorten one, shorten both.

How to read it

• Above 80 and below 20 are the conventional extremes — narrower than RSI’s, because volume weighting makes the series more volatile.
• RSI rising while MFI does not means price is advancing on thinning participation. That divergence is the main reason to run both.
• On instruments with unreliable reported volume the indicator inherits that unreliability directly.
• A reading stuck near an extreme through a trend means the same thing it does on RSI — that the market is trending, not that it is stretched.

Where it misleads

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