What It Is
The Money Flow Index (MFI) is essentially RSI weighted by volume. It oscillates between 0 and 100, measuring both the direction and intensity of money flowing into and out of an asset. Readings above 80 indicate overbought, below 20 indicate oversold.
Key insight: While RSI only considers price changes, MFI factors in volume. This means MFI can distinguish between a price move on heavy volume (strong conviction) and a price move on light volume (weak conviction). Volume is the key differentiator.
MFI is sometimes called the 'Volume RSI' because of its similar calculation method. The addition of volume makes it slightly more reliable for crypto markets where volume spikes often precede major moves.
Trading Application
Use MFI as a volume-enhanced RSI for confirmation. When both RSI and MFI agree on a signal, the probability is higher. When they disagree, MFI's volume component often proves more reliable.
MFI is particularly useful in crypto where volume data is available and meaningful. Watch for MFI divergence at key support/resistance zones for high-probability reversal setups.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
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Compare this reference with related structures and readings before applying it to a live chart.