Money Flow Index (MFI)

The Money Flow Index (MFI) is a momentum oscillator that incorporates both price and volume data to measure the strength of money flowing into and out of a security — making it a volume-weighted version of the Relative Strength Index (RSI). MFI is calculated using the typical price (average of high, low, and close), the money flow (typical price multiplied by volume), and the ratio of positive to negative money flow over a specified period (typically 14 days). MFI ranges from 0 to 100 — readings above 80 indicate overbought conditions (potential selling opportunity), while readings below 20 indicate oversold conditions (potential buying opportunity). Divergences between MFI and price are particularly significant — for example, when Nifty 50 makes a new high but MFI fails to confirm it, this negative divergence signals weakening buying conviction and a potential trend reversal. In Indian equity markets, MFI is widely used by technical traders to confirm volume-backed price moves and identify exhaustion in trending stocks.