CASH FLOW INDEX

CASH FLOW INDEX

o MFI is a momentum indicator that measures the strength of money in and out of security.
o a divergence between the MFI and price trend can be interpreted as a possible trend reversal.
o It is similar to the Relative Strength Index (RSI).
o The difference is that, too, MFI accounts for volume, whereas the RSI only incorporates prices.
o It is important to consider other indicators that will support your entry and exit points
o Keep in mind that spiky peaks often indicate that cash flow is to top out.
o Gaps in price action may present another problem that needs to be aware of: we determine the money flow by calculating the midpoint of the price action, but if there are major gaps, and then the middle point of link disappeared, and the money flow numbers are skewed.
o Cash flow may be good for identifying overbought oversold positions and
o its dependence on the accumulation / distribution can distort their numbers if the environment is missing.
o Remember to always use signals with other indicators to confirm your entry and exit points.