The Money Flow Index (MFI) is often called "volume-weighted RSI." Like RSI, it's a 0-100 momentum oscillator flagging overbought (typically above 80) and oversold (below 20) conditions — but it incorporates volume, not just price. It measures the flow of money into and out of an asset.
What volume adds
By weighting price moves by volume, MFI distinguishes a rally on heavy participation (real money flowing in) from a drift on thin volume (weak, suspect). A price rise on low volume that fails to push MFI up is a warning the move lacks conviction. This is the same insight as OBV, packaged as a bounded oscillator.
Divergence is the strongest signal
MFI's most useful read is divergence: price makes a new high but MFI doesn't (money isn't following the price up — bearish), or price makes a new low but MFI holds (selling is drying up — bullish). Because it captures volume, MFI divergence can be an earlier, more meaningful tell than price-only oscillator divergence.
When price makes a new high but the money flow doesn't follow, the rally is running on fumes.
Using it
Like every oscillator, MFI's overbought/oversold levels are traps in strong trends — it can pin high while price climbs. Its edge is the volume dimension: use it to judge whether a move has real participation behind it and to spot divergences, alongside price structure and regime. One input, weighed with the rest.
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