Definition
Money Flow Index (MFI)
The Money Flow Index is a volume-weighted momentum oscillator that flags overbought and oversold conditions using price and volume.
Often called the volume-weighted RSI, MFI runs on a 0-100 scale: readings above 80 suggest overbought and below 20 oversold, but because it factors in volume, it reflects the conviction behind moves better than price-only oscillators. Divergence between MFI and price warns of weakening momentum.
Indian traders use MFI on stocks and indices to confirm whether buying or selling pressure is backed by real volume, and to spot exhaustion at extremes. Like RSI, it is most useful in range-bound markets and as a confirmation tool rather than a stand-alone signal.
Related terms
- Stochastic OscillatorThe stochastic oscillator compares a closing price to its recent range to flag overbought and oversold conditions.
- DivergenceDivergence occurs when price and an indicator like RSI or MACD move in opposite directions, warning of a possible reversal.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.