What the Money Flow Index is
The Money Flow Index (MFI) is an oscillator, a line that moves inside a fixed range below the price chart. It works like the RSI indicator, with one difference: RSI uses only price, while MFI also weights each bar by its volume. A rise on heavy volume counts for more than a rise on light volume.
Do not confuse it with Bill Williams' Market Facilitation Index, which shares the same initials but measures something else.
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The formula in plain words
- Typical price: the average of a bar's high, low and close.
- Raw money flow: typical price multiplied by the bar's volume.
- Positive or negative flow: if the typical price is above the previous bar's, that bar's flow counts as positive. If it is below, the flow counts as negative.
- Money ratio: positive flow summed over the lookback period, divided by negative flow summed over the same period.
- MFI: the money ratio scaled into a bounded range, the same way RSI is scaled.
The default period and the overbought and oversold lines are preset in the indicator's settings window. Check them there rather than assuming them.
How to add MFI in MT4 and MT5
In both MetaTrader 4 and MetaTrader 5, go to Insert, then Indicators, then Volumes, then Money Flow Index. You can also drag it from the Navigator window. The settings window lets you change the period, the level lines and the colours. MT5 also lets you choose which volume type the indicator uses.
How to read it
| Reading | What it describes |
|---|---|
| Line near the upper level | Recent buying has been heavy relative to selling (overbought) |
| Line near the lower level | Recent selling has been heavy relative to buying (oversold) |
| Line rising while price is flat | Volume is coming in on up bars |
| Price and MFI moving apart | Divergence, a possible weakening of the move |
The terms overbought and oversold describe a state, not a coming turn. See overbought and oversold and divergence.
Drawn example (not live prices)
At point B, price makes a higher high while MFI makes a lower peak. This shows that the second push came with less volume-weighted buying. It is a description of the move. It does not tell you what price will do next.
Typical uses
- Context for a trend: in a strong trend, MFI can stay near an extreme for a long time. Traders read that as a sign of strength, not as a reversal.
- Divergence checks: comparing swing highs and lows on price and on MFI.
- Confirmation: some traders check whether a breakout happened with rising MFI.
Any "MFI indicator strategy" you find online still needs testing on a demo account. It also needs position sizing from risk management.
Where MFI misleads
- Forex volume is tick volume. For currency pairs and most CFDs, MetaTrader shows the number of price changes, not the traded amount. MFI on forex therefore weights by tick activity only. Compare volume in forex.
- Strong trends. Readings at an extreme can last while price keeps going.
- Thin sessions and gaps. Low activity or a gap can push the line sharply on very few bars.
- Short periods. A shorter lookback reacts faster but produces more noise. A longer one is smoother but lags.
- Divergence can persist. Price can keep diverging from MFI for a long time before anything changes, or nothing may change at all.
For experienced traders
- Choosing a period changes how sensitive MFI is to single high-volume bars. Test several periods on the same history before trusting any of them.
- Moving the level lines further from the centre gives fewer extreme readings but does not make them more reliable.
- Pair MFI with a cumulative volume tool such as On-Balance Volume or Chaikin Money Flow. These are built differently and can disagree with MFI.
- Indicators on leveraged CFDs do not reduce risk. Leveraged forex and CFD trading can lose money fast.
Frequent questions
Is MFI the same as RSI?
No. It uses the same scaling idea, but MFI weights each bar by volume and RSI uses price alone.
How do I use MFI on forex pairs?
Read it knowing that it uses tick volume, and check it against price structure and other tools.
What are the default settings?
They are preset in the indicator's settings window in MT4 and MT5. Open that window to see the current values.
Does MFI repaint?
On closed bars it does not change. The value on the current, still-open bar updates until that bar closes.
Can MFI tell me when to enter a trade?
No indicator gives certain entries. MFI describes recent volume-weighted price pressure, and that pressure can continue or fade.