Module 9 · Lesson 7
Money Flow Index (MFI): How It Works and How to Read It
The Money Flow Index combines price and trading volume in a momentum oscillator. It estimates whether recent volume accompanied higher or lower typical prices; it does not reveal who traded or why.
Quick answer
What information goes into MFI?
MFI uses a typical price, commonly the average of high, low, and close, together with volume. It compares positive and negative money-flow estimates over a chosen period and maps the result to 0–100. It is a chart calculation, not a literal measure of cash entering or leaving a company.
How does MFI classify a period?
If the current typical price rises from the previous period, that period’s typical price times volume is commonly counted as positive money flow; if it falls, it is counted as negative. The indicator compares totals over its lookback window. The classification is a formula based on market data, not evidence of each trader’s intent.
What do 20 and 80 mean?
These are commonly watched low and high levels on the 0–100 scale. They describe an extreme under the selected calculation, not a price floor or ceiling. A strong trend can sustain an extreme reading, and other lookback settings can change when it occurs.
How does MFI differ from RSI?
RSI is based on price changes; MFI also weights periods using volume. That may make two chart readings differ, but neither establishes future direction. Compare the same dates, intervals, and settings when discussing the difference.
What can divergence show?
Price can make a new high while MFI does not. That describes different price-volume behavior under the calculation. It does not prove that institutional investors sold or that the next move is down. Check volume data quality and the underlying event.
What are the limits of this indicator?
The phrase “money flow” can imply actual fund transfers or identifiable buying pressure. MFI does neither. A reading alone is too thin for a trade decision, and repeated timing attempts add risk and cost.
IBM: reproduce a dated 14-session Money Flow Index
Sources: Alpha Vantage: IBM daily price and share-volume observations; Fidelity: indicator formula. Checked October 8, 2026. Prices are US dollars per share; volume is reported shares. These are the provider’s unadjusted daily observations, not assumed prices or real-time quotes.
Calculate MFI for the 14 sessions from September 18 through October 7. September 17 supplies the preceding typical price needed to classify September 18. Typical price = (high + low + close) / 3; raw money flow = typical price × reported volume. A higher typical price than the preceding session contributes positive flow; a lower one contributes negative flow. An unchanged typical price contributes neither in this exercise.
Show the dated high, low, close and volume inputs
| Date | High ($) | Low ($) | Close ($) | Volume (shares) |
|---|---|---|---|---|
| 2026-09-16 | 243.3399 | 235.4100 | 237.4900 | 6,181,838 |
| 2026-09-17 | 243.3650 | 237.3500 | 237.7500 | 5,905,870 |
| 2026-09-18 | 237.8900 | 229.3800 | 229.5500 | 13,413,822 |
| 2026-09-21 | 234.7000 | 228.3500 | 231.9300 | 8,200,086 |
| 2026-09-22 | 236.2000 | 230.0800 | 231.3800 | 4,808,838 |
| 2026-09-23 | 237.8600 | 232.5300 | 232.7600 | 4,539,608 |
| 2026-09-24 | 232.6168 | 226.0100 | 227.0600 | 4,149,575 |
| 2026-09-25 | 228.9900 | 225.1900 | 225.5100 | 4,147,449 |
| 2026-09-28 | 223.1356 | 219.2300 | 220.6700 | 5,291,533 |
| 2026-09-29 | 223.1200 | 219.9100 | 219.9900 | 3,766,484 |
| 2026-09-30 | 222.3300 | 218.6000 | 219.9300 | 4,569,780 |
| 2026-10-01 | 234.2700 | 224.5000 | 225.6200 | 8,884,106 |
| 2026-10-02 | 225.9150 | 221.6300 | 222.6400 | 7,756,783 |
| 2026-10-05 | 222.8800 | 220.3000 | 221.5800 | 6,318,079 |
| 2026-10-06 | 224.5100 | 221.0000 | 221.2900 | 3,938,659 |
| 2026-10-07 | 222.4100 | 218.7900 | 220.5100 | 3,895,497 |
| Date | Typical price ($) | Direction | Raw flow ($ millions) |
|---|---|---|---|
| 2026-09-18 | 232.2733 | Negative | 3115.6731 |
| 2026-09-21 | 231.6600 | Negative | 1899.6319 |
| 2026-09-22 | 232.5533 | Positive | 1118.3113 |
| 2026-09-23 | 234.3833 | Positive | 1064.0085 |
| 2026-09-24 | 228.5623 | Negative | 948.4363 |
| 2026-09-25 | 226.5633 | Negative | 939.6599 |
| 2026-09-28 | 221.0119 | Negative | 1169.4916 |
| 2026-09-29 | 221.0067 | Negative | 832.4181 |
| 2026-09-30 | 220.2867 | Negative | 1006.6616 |
| 2026-10-01 | 228.1300 | Positive | 2026.7311 |
| 2026-10-02 | 223.3950 | Negative | 1732.8265 |
| 2026-10-05 | 221.5867 | Negative | 1400.0021 |
| 2026-10-06 | 222.2667 | Positive | 875.4326 |
| 2026-10-07 | 220.5700 | Negative | 859.2298 |
| Calculation | Result |
|---|---|
| Sum of positive raw money flow | $5,084,483,470.27 |
| Sum of negative raw money flow | $13,904,030,849.69 |
| Money-flow ratio = positive / negative | 0.36568413 |
| MFI = 100 − 100 / (1 + ratio) | 26.7766 |
The calculation weights classified price changes by reported share volume. “Positive” and “negative” are indicator classifications, not measured cash entering or leaving IBM or a count of buyers versus sellers. An extreme reading can persist; MFI alone does not establish a trade or a future return.
Key takeaways
- MFI combines typical price and reported share volume over a stated window.
- Classify each period by its typical-price change before summing positive and negative flow.
- Indicator money flow is a calculation, not measured investor cash flow or a guaranteed signal.
Check your understanding
1. Which inputs are used by MFI?
A. Price and volume. B. Only company revenue. C. Only dividends.
Show answer and feedback
A. MFI combines a typical price with volume.
2. Does MFI identify which investors bought?
A. Yes. B. No; it is calculated from public price and volume. C. Only at 80.
Show answer and feedback
B. The oscillator cannot reveal participant identity or motive.
3. What does a reading above 80 guarantee?
A. A reversal. B. A profitable trade. C. Nothing about the next move.
Show answer and feedback
C. It is a historical indicator extreme, not a forecast.
Why question: Why can MFI and RSI give different impressions on the same dates?
Show a sample explanation
MFI includes trading volume in its calculation, while RSI uses price changes without that volume weighting.
Observe AAPL with this indicator
Open StockEducation’s chart tool with AAPL loaded. Open the AAPL daily chart. If MFI and volume are offered, record a date with unusual volume and compare MFI with the adjacent price bars. If MFI is unavailable, compare two daily bars with similar price changes but different volume and explain why a volume-weighted indicator might respond differently.
Where can you check the definition and risk context?
- Fidelity: Money Flow Index
- FINRA: What Is Market Timing?
- FINRA: Stocks and Price Volatility
- SEC Investor.gov: Introduction to Investing
End of Lesson · Continue to the Next Topic
AI responses are for educational purposes. Always verify with official course materials.
This lesson teaches a concept. It is general education, not advice about your money. Before you act on anything you learn here, speak to someone licensed.
Sources and reference material
Primary sources and original reference material for the concepts discussed on this page.
- www.fidelity.com — mfi
- Fidelity: Money Flow Index
- FINRA: market timing and buy-and-hold strategies
- FINRA: Stocks
- SEC Investor.gov: Introduction to Investing
References added 14 October 2026.
AI responses are for educational purposes. Always verify with official course materials.
This lesson teaches a concept. It is general education, not advice about your money. Before you act on anything you learn here, speak to someone licensed.
This lesson teaches a concept. It is general education, not advice about your money. Before you act on anything you learn here, speak to someone licensed.
