How it is calculated
As TA-Lib's MFI (Quong and Soudack 1989): money flow is the typical price (high plus low plus close, divided by 3) times volume, positive when the typical price rose against the bar before, negative when it fell, neither when it held. MFI is 100 times the positive flow over positive plus negative flow, each summed over the length; the first value is at bar length. A window with no flow at all gives 0, as TA-Lib does.
Reference: TA-Lib MFI (Quong and Soudack 1989)
How to read it
Above 80 the market is often called overbought, below 20 oversold. Like RSI it can stay there in a strong trend, so a turn back across the line and divergences against price say more than the level. On forex the volume is tick volume, which weights busy bars more, not larger orders.
In a strategy
A mean reversion entry when ctx.ind("mfi", length=14) crosses back above 20, compared with the value a bar earlier, or a filter that allows no longs above 80.
Inputs
| Input | Type | Default | Range or choices |
|---|---|---|---|
Lengthlength | Whole number | 14 | min 2, max 5000 |
What it draws
| Line | Drawn as |
|---|---|
| MFI | Line |
Moves between 0 and 100. Guide lines at 20, 80.
Used in
No strategy template reads it yet.