Money Flow Index is oscillator very similar to RSI where in this one, we measure price. Given a certain period and values, we can calculate MFI. Be sure to read about more on the history and use of MFI also here on this link before we start.
There are four formulas in order to manually get a value of a certain term. For example, if you want to get to total money flow index, you need to calculate the money flow ratio first. How to get the money flow ratio is another formula as you need to identify the two different flows. It may sound complicated but if you follow the formulas, it’s not as complicated as it is.
The first formula is getting the Typical Price. Here you need three factors in order to get the result. First you need to find the high, low and the close and the total of those will be divided in to three. As for the time frame, you can calculate this anytime so there’s no specific limit on what period you want to calculate. To make things easy, just get the average of the High, low and close to get the Typical Price.
Simply, Typical Price = (High + Low + Close) / 3
For example, the chart above shows the high of 46.61, low of 46.15 and a close of 46.58. So, 46.61+46.15+46.58 = 139.34 – the sum of the three. Next is you divide by three so 139.34/3 = 46.45. 46.45 is now your Typical Price.
(High+Low+Close)/3= Typical Price.
(46.61+46.15+46.58)/3 = TP
TP = 46.45
Next one is calculating for the Raw Money Flow. Note that there are two kinds of money flows namely the negative and positive but it is also essential to know the raw data.
For the Raw Money Flow: RMF = Typical Price x Volume. Using the same example above, we already got the typical price of 46.45 for the given period. To determine the money flow, we just have to multiply the value to the volume of the said period.
Here, you can see that the volume is 1365. Multiply that to 46.45 and you’ll get the product of 63404.25. This is now your Raw Money Flow.
RMF = TP X Volume
RMF = 46.45 X 1365
RMF = 63404.25
Next step requires another term that is the same as Raw Money Flow. This is the period of Positive Money Flow. The previous example can be considered a positive money flow for the candle stick indicates that it rose.
So simply, the period of positive money flow is 63,404.25.
Another term is the opposite of the previous one which is the period of negative money flow. Since the first one is a rise, we can’t call it positive so we need a new one. The period above shows a tumble from the previous period. Again, we need to calculate the typical price and the raw money flow and the raw money flow will serve as the period of negative money flow.
So the factors are:
High = 45.23
Low = 44.06
Close = 44.32
Volume = 3996
TP = (High+Low+Close)/3
TP = 133.61/3
TP = 44.54
Now for the Raw Money Flow
RMF = TP X Volume
RMF = 44.54 X 3996
RMF = 17,781.84
17,781.84 will now serve as your period of negative money flow.
Then, you will need the period of negative and positive money flow in order to get the Money Flow Ratio. The formula for this is MFR = (14-period Positive Money Flow)/ (14-period Negative Money Flow)
Given the factors above:
MFR = (14-period Positive Money Flow)/ (14-period Negative Money Flow)
MFR = (14-63,404.25)/(14-17,781.84)
MFR = (-63,390.25)/(-17767.84)
MFR = 3.56769590
Finally, the money flow index. This is rather complicated than the recent ones. We follow this formula: Money Flow Index = 100 – (100 ÷ (1 + Money Ratio)
Given the two periods, we need to find the MFI for 4-20-16.
MFI = 100 – (100 / (1 + Money Ratio)
MFI = 100 – (100 / (1 + 3.5677)
MFI = 78.11
This is a sample table where you can see, the MFI we calculated will always need the previous values of negative and positive.
So there we have it! That’s all the formulas you need to know about the simple calculations of MFI. You just need to remember the formulas given in order to get the total MFI.
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