Money Flow Index

The Money Flow Index (MFI) is often described as a volume-weighted RSI because its calculation structure closely mirrors RSI but incorporates trading volume into the formula. While RSI measures momentum based on price change alone, MFI requires that price movements be supported by proportional volume activity, making it a hybrid indicator that bridges the momentum and volume dimensions of analysis. The calculation begins with the typical price for each bar — the average of high, low, and close. This typical price is multiplied by the bar's volume to produce the raw money flow value. Bars where the typical price is higher than the previous bar's typical price are classified as positive money flow; bars where it is lower are classified as negative money flow. The ratio of positive to negative money flow over the lookback period — typically 14 bars — is then converted into a bounded 0-to-100 scale using the same normalisation formula as RSI. Because volume is embedded in the calculation, MFI can diverge significantly from RSI when price moves are accompanied by unusually high or low volume. A price rise on declining volume will produce a weaker MFI reading than RSI would show, reflecting the lack of conviction behind the move. Conversely, a price rise on surging volume will push MFI higher than RSI. Standard overbought and oversold thresholds are 80 and 20 respectively, though some analysts use 90 and 10 for stronger signals. The most powerful MFI signal is divergence: when price rises to a new high but MFI makes a lower high, it suggests the advance is not being supported by proportional volume, indicating weakening institutional participation. This divergence often precedes price reversals and is considered a higher-quality signal than simple threshold crossings. Signal Thresholds — Money Flow Index (MFI) Standard period 14 (same as RSI). Overbought zone Above 80 — buying pressure is extreme relative to the look-back period. Extreme overbought Above 90 — historically a high-conviction signal for a short-term correction. In Bitcoin, MFI above 90 has frequently preceded weekly pullbacks of 5–15%. Oversold zone Below 20 — selling pressure is extreme. Extreme oversold Below 10 — panic-sell territory; historically associated with short-term price floors. Divergence MFI divergence carries more weight than RSI divergence because it incorporates volume. Rising price with falling MFI (especially above 80) is a particularly reliable bearish signal in liquid crypto markets.