Money Flow Index (14)

The Money Flow Index (14) is a momentum oscillators indicator used in Skyrexio Strategy Builder for momentum analysis and overbought/oversold identification.

Introduction

The Money Flow Index (MFI) is a volume-weighted momentum oscillator that combines price and volume data to measure buying and selling pressure. Often called the "Volume RSI," MFI oscillates between 0-100 and provides more reliable signals than price-only indicators by incorporating trading volume confirmation.

How Money Flow Index Works

Money Flow Index calculates momentum by incorporating both price movement and volume data:

• Volume-weighted calculation - Combines typical price with volume to create money flow • 0-100 range - Bounded oscillator similar to RSI but with volume confirmation • Overbought/Oversold levels - Values above 80 indicate overbought conditions, below 20 indicate oversold • Money flow analysis - Positive money flow occurs when typical price rises, negative when it falls • 14-period smoothing - Uses 14-period calculation for balance between sensitivity and reliability

Volume Psychology: MFI reveals the conviction behind price movements by measuring the volume of money flowing into and out of a security. High MFI with rising prices shows strong buying pressure, while high MFI with falling prices indicates distribution by large players.

Key Characteristics

Attribute	Details
Category	Momentum Oscillators
Type	Volume-Weighted Momentum Indicator
Primary Use	Overbought/oversold identification with volume confirmation
Timeframe	All timeframes supported (1m to 1M)
Confirmation	Volume analysis, divergence patterns, trend direction

Strategy Applications

🟢 LONG STRATEGY (Oversold Reversal)

MFI is highly effective for LONG strategies when identifying oversold conditions with volume confirmation. MFI below 20 indicates oversold conditions where buying pressure may emerge, especially when confirmed by volume analysis.

Base Entry Order (LONG)

Trigger Type: Once per bar close
Bar TF: 1H
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 20

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

Additional Entry Orders (LONG)

Additional Entry 1: MFI rising from oversold levels
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 25

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Money Flow Index (14)
Timeframe: 1H

OR

Additional Entry 2: Bullish divergence confirmation
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Cross Above
Second Condition: Value
Value: 30

Take Profit Orders (LONG)

Rule 1: Exit condition - MFI reaches overbought levels
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 80

OR

Rule 2: Exit condition - MFI momentum divergence
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Money Flow Index (14)
Timeframe: 1H

OR

Rule 3: Exit condition - Volume confirms distribution
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75

Stop Loss Orders (LONG)

Rule 1: Stop loss - MFI breaks below oversold support
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 15

OR

Rule 2: Stop loss - Volume confirms breakdown
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 20

OR

Rule 3: Stop loss - Bearish momentum acceleration
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Money Flow Index (14)
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25

🔴 SHORT STRATEGY (Overbought Reversal)

MFI is equally effective for SHORT strategies when identifying overbought conditions with volume confirmation. MFI above 80 indicates overbought conditions where selling pressure may emerge, especially when confirmed by distribution volume.

Base Entry Order (SHORT)

Trigger Type: Once per bar close
Bar TF: 1H
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 80

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

Additional Entry Orders (SHORT)

Additional Entry 1: MFI falling from overbought levels
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 75

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Money Flow Index (14)
Timeframe: 1H

OR

Additional Entry 2: Bearish divergence confirmation
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Cross Below
Second Condition: Value
Value: 70

Take Profit Orders (SHORT)

Rule 1: Exit condition - MFI reaches oversold levels
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 20

OR

Rule 2: Exit condition - MFI momentum divergence
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Money Flow Index (14)
Timeframe: 1H

OR

Rule 3: Exit condition - Volume confirms accumulation
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25

Stop Loss Orders (SHORT)

Rule 1: Stop loss - MFI breaks above overbought resistance
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 85

OR

Rule 2: Stop loss - Volume confirms breakout
First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 80

OR

Rule 3: Stop loss - Bullish momentum acceleration
First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Money Flow Index (14)
Timeframe: 1H

AND

First Condition: Money Flow Index (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75

Advanced Strategy Combinations

MFI Divergence Strategy

Bullish Divergence

Setup:

• Price making lower lows

• MFI making higher lows

• Volume increasing on MFI recovery

• RSI confirming momentum shift

Entry: MFI crosses above 30 with volume confirmation

Bearish Divergence

Setup:

• Price making higher highs

• MFI making lower highs

• Volume increasing on MFI decline

• RSI confirming momentum shift

Entry: MFI crosses below 70 with volume confirmation

Volume-Confirmed Reversal Strategy

Setup Process:

1. Identify MFI in extreme territory (>80 or <20)

2. Wait for volume spike confirming the move

3. Look for MFI momentum divergence

4. Confirm with price action and Volume analysis

Execution:

• Base Order: MFI extreme + volume confirmation

• Additional: MFI momentum change + continued volume

• Take Profit: MFI reaching opposite extreme or momentum divergence

• Stop Loss: MFI breaking further into extreme territory with volume

Multi-Timeframe MFI Analysis

Setup

Higher Timeframe Context:

• Daily: MFI trend direction and major levels

• 4H: MFI momentum and volume patterns

• 1H: MFI entry signals and execution

Volume Confirmation:

• All timeframes showing consistent volume patterns

• Higher timeframe volume supporting MFI direction

Execution

Entry: 1H MFI signal with multi-timeframe confirmation Target: Previous swing levels or opposite MFI extreme Stop: MFI breaking key levels with volume confirmation

Risk Management Guidelines

Position Sizing

Strategy Type	Position Size	Conditions
LONG Strategy	Standard	MFI < 20 with volume
SHORT Strategy	Standard	MFI > 80 with volume
Divergence Plays	Increased (125%)	Strong volume confirmation
Weak Volume	Reduced (50%)	MFI signals without volume support

MFI Reliability Factors

High Reliability

✅ Volume confirms MFI direction ✅ Clear divergence patterns ✅ Extreme MFI values (>85 or <15) ✅ Multi-timeframe alignment ✅ Consistent volume patterns

Low Reliability

❌ Low volume MFI signals ❌ MFI oscillating in middle range (30-70) ❌ Conflicting volume patterns ❌ Choppy, ranging market conditions ❌ Mixed momentum signals

Best Practices

For LONG Strategies

1. Volume confirmation - Ensure buying volume supports MFI oversold signals

2. Divergence validation - Look for bullish divergence in oversold territory

3. Extreme levels - Focus on MFI < 15 for strongest reversal signals

4. Multi-timeframe - Confirm with higher timeframe MFI trends

For SHORT Strategies

1. Distribution volume - Ensure selling volume supports MFI overbought signals

2. Bearish divergence - Look for distribution patterns in overbought territory

3. Extreme levels - Focus on MFI > 85 for strongest reversal signals

4. Volume analysis - Confirm with Volume and OBV indicators

Common Mistakes to Avoid

• Ignoring volume - Trading MFI signals without volume confirmation

• Wrong levels - Using standard RSI levels (70/30) instead of MFI levels (80/20)

• Missing divergence - Not recognizing volume-price divergence patterns

• Weak signals - Trading MFI in middle range without extreme readings

Market Conditions Analysis

Market Type	LONG Strategy Effectiveness	SHORT Strategy Effectiveness
Uptrend	🟢 High (oversold bounces)	🟡 Medium (overbought exits)
Downtrend	🟡 Medium (oversold bounces)	🟢 High (overbought reversals)
Ranging	🟢 High (mean reversion)	🟢 High (mean reversion)
High Volume	🟢 High (confirmed signals)	🟢 High (confirmed signals)
Low Volume	🔴 Low (wait for volume)	🔴 Low (wait for volume)

Related Indicators

Indicator	Relationship	Link
RSI	Price-only momentum	RSI
Volume	Volume confirmation	Volume
OBV	Volume flow analysis	On Balance Volume
A/D Line	Accumulation/distribution	Accumulation/Distribution

Conclusion

Money Flow Index combines the power of RSI with volume confirmation, making it superior to price-only momentum indicators. Its volume-weighted approach provides more reliable signals and helps identify institutional accumulation and distribution patterns.

Key Takeaways

• PRIMARY USE: Volume-confirmed overbought/oversold identification

• SECONDARY USE: Divergence analysis and institutional activity detection

• ALWAYS: Confirm with volume analysis and use extreme levels (>80, <20)

• VOLUME CRITICAL: MFI signals without volume confirmation are unreliable

Success with Money Flow Index requires understanding that it's not just about price momentum, but about the volume of money flowing into and out of the market. Use it to identify when smart money is accumulating or distributing, and always confirm signals with volume analysis for the most reliable trading opportunities.

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