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Volume-weighted RSI measuring buying and selling pressure.
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.
Overbought/oversold: MFI above 80 with declining price = bearish divergence. MFI below 20 with rising price = bullish divergence. These extremes carry more weight than RSI extremes because volume confirms the signal.
Divergence: MFI divergence is often more reliable than RSI divergence because it incorporates volume. When price makes a new high on declining MFI, institutions may be distributing while retail buys the top.
MFI crossing 50: Like RSI, the 50 level acts as a bull/bear divider. MFI rising above 50 suggests net money inflow; falling below suggests net outflow.
This indicator works best when combined with price action analysis. Never trade indicators alone - always confirm with the chart.
Indicators confirm what price action shows. They don't replace it. Never trade based on an indicator signal alone. Always combine with chart structure, pattern recognition, and volume analysis.
The Academy teaches when to use this indicator, when to ignore it, and how to combine it for high-probability setups.
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