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MFI

VOLUME INDICATORS, PART 2. SEVEN COMMON VOLUME INDICATORS.Understanding Volume Indicators: Volume indicators are essential tools for traders and analysts, providing insights into market activity and sentiment. In this guide, we'll explore seven common volume indicators and how you can use them to enhance your trading strategies. 1. Volume Volume is the simplest volume indicator, representing the total number of shares or contracts traded over a specific period. It's like the crowd size at a Super Bowl game—when the stadium is packed and roaring, it indicates a lot of interest and activity. Similarly, high trading volume suggests significant buying or selling activity in the market. Traders often use volume to confirm the strength of price movements and identify potential trends. Volume, the bedrock of volume analysis, represents the total number of shares or contracts traded over a specific period. Common parameter values range from 20 to 50 periods for short-term analysis and 100 to 200 periods for long-term trends. Remember, volume precedes price movements, so significant changes can hint at impending shifts in direction. 2. On-Balance Volume (OBV) On-Balance Volume (OBV) adds a cumulative total of volume when the price closes up and subtracts it when the price closes down. It's akin to keeping score of how loud each team's fans are cheering during the Super Bowl game. If one team's supporters get louder as the game progresses, it suggests growing momentum for that team. Likewise, OBV helps traders gauge buying and selling pressure, providing insights into potential price movements. A rising OBV indicates bullish momentum, while a falling OBV suggests bearish sentiment. On-Balance Volume (OBV) tracks cumulative volume based on price movements. Set your period length typically between 14 to 20 periods for optimal results. A rising OBV confirms bullish trends, while a falling OBV suggests bearish sentiment. Divergences between OBV and price often foreshadow reversals. 3. Accumulation/Distribution Line (A/D Line) The Accumulation/Distribution Line (A/D Line) combines price and volume to show how much of a security is being accumulated or distributed. It's like a tug-of-war between the two teams during halftime at the Super Bowl. The team with more supporters pulling harder gains ground. Similarly, the A/D Line measures the battle between buyers and sellers. If it's trending upwards, it suggests that accumulation (buying) is outweighing distribution (selling), indicating potential upward price movement. The Accumulation/Distribution Line (A/D Line) gauges the flow of funds into or out of a security. Optimal period lengths range from 14 to 30 periods. Rising A/D Line values signal accumulation and potential price appreciation, while declining values indicate distribution and possible downturns. 4. Chaikin Money Flow (CMF) Chaikin Money Flow (CMF) measures the flow of money into or out of a security based on both price and volume. It's akin to checking the enthusiasm of the fans after each touchdown at the Super Bowl. If the fans are still hyped and buying team merchandise, it suggests sustained enthusiasm and support. CMF helps traders assess the strength of buying or selling pressure. A positive CMF suggests buying pressure, while a negative CMF indicates selling pressure. Chaikin Money Flow (CMF) measures buying and selling pressure relative to price movements. Common period lengths vary from 10 to 30 periods. Positive CMF values indicate buying pressure, while negative values suggest selling pressure. Look for divergences between CMF and price for early reversal signals. 5. Volume Weighted Average Price (VWAP) Volume Weighted Average Price (VWAP) calculates the average price a security has traded at throughout the day, weighted by volume. It's like a buffet at a Super Bowl party where each dish is labeled with the average popularity rating from all the guests. The more popular dishes have a higher average rating. Similarly, VWAP gives traders a sense of the average price level where most trading activity has occurred. Traders use VWAP to assess whether their trades were executed at favorable prices relative to the day's average. Volume Weighted Average Price (VWAP) calculates the average price weighted by volume. Period lengths typically range from 20 to 50 periods. VWAP acts as a dynamic support or resistance level, guiding traders on optimal entry and exit points. Monitor deviations from VWAP to identify potential trend shifts. 6. Money Flow Index (MFI) The Money Flow Index (MFI) measures the rate at which money is flowing into or out of a security based on both price and volume. It's akin to fans at the Super Bowl game exchanging team merchandise and tickets. The more transactions happening, the more money is flowing between fans. MFI helps traders gauge market sentiment. A high MFI suggests strong buying pressure, while a low MFI indicates selling pressure. Traders often look for divergences between MFI and price movements to anticipate potential reversals. The Money Flow Index (MFI) evaluates the rate of money flow into or out of a security. Optimal period lengths usually range from 10 to 20 periods. High MFI values indicate overbought conditions, while low values suggest oversold conditions. Watch for divergences between MFI and price for reversal signals. 7. Volume Rate of Change (VROC) Volume Rate of Change (VROC) measures the rate of change in volume over a specific period, showing whether volume is increasing or decreasing rapidly. It's like measuring the acceleration or deceleration of the crowd's excitement level during different parts of the Super Bowl game. If the crowd gets louder and louder as the game progresses, it indicates increasing excitement and momentum. Similarly, a rising VROC suggests increasing buying or selling activity, while a falling VROC suggests waning activity. Volume Rate of Change (VROC) measures the rate of change in volume over a specific period. Common period lengths vary from 10 to 20 periods. Rising VROC values signify increasing volume momentum, indicating potential price continuation. Falling values may precede price reversals. GME and VOLUME? Let's go back and see GME on the Weekly In conclusion, volume indicators provide valuable insights into market sentiment and potential price movements. By understanding and incorporating these indicators into your trading strategy, you can make more informed decisions and improve your overall trading performance. REMEMBER, no one indicator on it's own tells you much, but a lot of different indicators all telling you the same thing at the same area... pay attention to that kind of confirmation. Hope this helps!! I've linked PART 1, 10 COMMON INDICATORS. This post is all Volume related. You can go in depth with all of these, I don't find it necessary for most traders, but the option is there, however, you'll need someone more advanced than myself to help you through that.
NASDAQ:TSLAEducation
by nicktussing77
What Is The Money Flow Index (MFI) in Trading?The Money Flow Index (MFI) is an indicator that measures the flow of money into and out of a particular financial asset and provides insights into the strength and direction of price trends. It’s an oscillator, like the RSI, Stochastic, and Awesome Oscillator. Moreover, it provides similar signals to the Stochastic. Is it worth learning about? Definitely, and in this FXOpen article, we will explain why. What Is the Money Flow Index? Developed by Gene Quong and Avrum Soudack, the MFI combines price and volume data to gauge the buying and selling pressure in the market. What is the Money Flow Index definition? The MFI is categorised as an oscillator, meaning that it fluctuates between 0 and 100, indicating overbought and oversold conditions. Traders often use it to identify potential reversal points and generate buy or sell signals. The Money Flow Index is used in crypto*, forex, and commodity markets. You can use it to analyse stock money flow data. Money Flow Index Formula To calculate the Money Flow Index, several steps are involved. Let's break down the formula: Typical Price (TP): This is the average of the high, low, and closing prices for a specific period. Money Flow (MF): This step calculates the amount of money flowing into or out of the asset. Positive Money Flow (PMF): This stands for the money flow on days when the current typical price is higher than the previous one. Negative Money Flow (NMF): This stands for the money flow on days when the current typical price is lower than the previous one. Money Ratio (MR): This measures the ratio between positive and negative money flows. Money Flow Index: Finally, the MFI is calculated by normalising the money ratio and converting it into a value between 0 and 100. TP = (High + Low + Close) / 3 MF = TP * Volume PMF = Sum of MF for all up days in the specified period NMF = Sum of MF for all down days in the specified period MR = PMF / NMF Money Flow Index = 100 - (100 / (1 + Money Ratio)) The MFI is typically calculated over a period of 14 days, but this setting can be adjusted to suit different trading strategies and timeframes. The common rule is that a shorter period suits strategies where a trader opens trades very often as the oscillator generates signals frequently, while a longer period is used by traders who aim for longer-term trades as the oscillator generates signals rarely, but they are considered more reliable. How to Use the MFI in Trading By providing insights into buying and selling pressure, the MFI helps traders identify overbought and oversold conditions, divergences, and failure swings, which can be used to generate potential trading signals. Overbought/Oversold Conditions As the MFI is an oscillator that fluctuates within a specific range, it’s quite easy to identify overbought/oversold market conditions using it. When the MFI rises above 80, it indicates an overbought condition, suggesting that the asset may be due for a price correction or a downward trend. An overbought condition implies excessive buying pressure, and a reversal in price might be imminent. Conversely, when the MFI drops below 20, it signifies an oversold condition, indicating excessive selling pressure and a potential upward price reversal. It's important to note that overbought or oversold conditions alone do not guarantee an immediate change in price direction. Traders wait for the oscillator to exit the overbought/oversold zone before they open a trade. When the MFI rises above 20, it’s usually considered a “buy” signal, while a fall below the 80 level may be considered a “sell” signal. In the Money Flow Index chart above, the indicator left the overbought area (1) before a solid downtrend started. A trader could use the MFI signal to enter a short trade; however, the index entered the oversold area (2), which could be considered a sign of a trend reversal, but the reversal didn’t happen, and the price continued moving down. Note: Oscillators can test overbought/oversold areas several times before an actual reversal occurs. Moreover, the indicator may provide incorrect signals in strong trends. Therefore, traders never use the indicator without a confirmation received from other technical analysis tools or fundamental data. Divergences MFI divergence occurs when the price and the MFI move in opposite directions. This can be bullish or bearish, providing valuable insights into potential trend reversals. Bullish divergence happens when the price forms lower lows while the MFI forms higher lows. This suggests that despite the price declining, buying pressure is increasing, indicating a possible upward movement. Conversely, a bearish divergence occurs when the price forms higher highs while the MFI forms lower highs, indicating a potential downward movement. In the chart above, the price formed a bearish divergence with the Money Flow Index, and the price declined significantly. Failure Swings Failure swings, also known as "bullish failure swings" or "bearish failure swings," are powerful signals generated by the Money Flow Index. A failure swing occurs when the MFI reaches overbought or oversold levels and then fails to surpass its previous peak or trough. This failure to exceed previous levels suggests a weakening of the prevailing trend and the possibility of a reversal. In a bullish failure swing, the MFI drops below the oversold level, rallies, manages to stick above the oversold area, although the price sets a new low, and then makes a new high. This indicates that despite the initial selling pressure, buyers are stepping in, creating a potential buying opportunity. Conversely, in a bearish failure swing, the MFI rises above the overbought level, declines, manages to stick below the 80 level although the price makes a new high, and then makes a new low. This shows that despite the initial buying pressure, sellers are entering the market, signalling a potential selling opportunity. In the chart above, the price was moving in a strong downward trend, but the MFI didn’t enter the oversold area after leaving it at the end of October. Once the indicator broke its previous high (1), a trend reversal was confirmed. Failure swings aren’t a common signal that traders use when trading with the Money Flow Index. However, they can be an additional tool to confirm price movements. To practise and develop your own Money Flow Index strategy, you can use the free TickTrader platform that implements over 600 trading instruments that you can trade with FXOpen. Final Thoughts The Money Flow Index is an effective indicator. Its signals are straightforward, and it has only one parameter, a period; therefore, even a trader with little experience will be able to customise it so it empowers their trading strategy. Although the calculations seem complicated, the tool is built to run automatically on trading platforms. Still, traders need to remember that the Money Flow Index should be used as part of a comprehensive trading plan and combined with proper risk management techniques. Traders can practise using the MFI on a demo account or backtest it on historical data to gain familiarity and confidence before applying it to live trading. When you feel comfortable with the indicator, you can open an FXOpen account. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice. *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
Education
by FXOpen
MFI From Scratch Hello, traders! As you know, the knowledge of a coin be overbought or oversold can be very profitable for any trader. That's why it's very important to identify these states. Moreover, the indicator that help us has already been invented. Well, today we'll speak aboout Money Flow Index. The Money Flow Index (MFI) is a technical oscillator that uses price and volume data for identifying overbought or oversold signals in an asset. It can also be used to spot divergences which warn of a trend change in price. The oscillator moves between 0 and 100. Unlike conventional oscillators such as the Relative Strength Index (RSI), the Money Flow Index incorporates both price and volume data, as opposed to just price. For this reason, some analysts call MFI the volume-weighted RSI. There are two possible ways of using this oscillator - diverhence and detecting overbought and oversold regions. It's rather easy to detect divergence of price with MFI. If you don't know whhat divergence is, read our cheat sheet to be aware of such powerful tool. The overbought and oversold levels are also used to signal possible trading opportunities. Moves below 10 and above 90 are rare. Traders watch for the MFI to move back above 10 to signal a long trade, and to drop below 90 to signal a short trade. I hope, you'll find the information useful. I try to make the articles that are interesting for me. However, I want to know your oppionoin. Write down to comments what is intersting for you.
Education
by Skyrexio
3
Money Flow Index: MFI analyses tutorial with 4H candlesticksMFI or Money Flow Index as a strategy is quite similar to RSI or Relative Strength Index. The key differentiator for MFI is the consideration of volume. Money Flow Index oscillator: MFI uses both price and volume to measure buying and selling pressure. MFI oscillates between 0 to 100. Intuitively, the volume-weighted feature makes MFI a comparatively better 'Lead' indicator than the RSI. Most reversals can be identified and acted upon best through the Money Flow Index oscillator. MFI above 80 indicates Overbought territory. It suggests that the underlying asset is driven by a buying pressure. MFI below 20 indicates Oversold territory. It indicates a selling pressure. MFI crossing over 20 gives a BUY signal. MFI crossing down the 80 mark gives a SELL signal. Stop loss should be used as a precautionary measure. Trailing stop loss can be used to let the profits ride, while ensuring safety in case of trend reversals. -------------------------------------------------------------------------------- Comments and feedback would push me to come out with better analyses. Thank you!
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Education
by civilKitten60243
20
IT'S MADNESS - A million indicators.... The SULTANS of SWING!Although you don't see a million on my charts, it is important to use a million indicators (or five or six). I like to think about it like lovers, the more you have... the more they will all agree with one another. When I'm making larger plays, I make sure that NOT JUST ONE , but multiple indicators agree with my predictions. Here are some of my favorite indicators. AROON (helps me to visualize trends. As with any indicator, the two lines crossing often represents a change in trend) www.investopedia.com Parabolic SAR (when a large trend begins it usually creates the beginning of a parabolic curve in this indicator, the same is true in the inverse) www.investopedia.com Chris Moody's MACD (An incredibly useful trend indicator. I've stripped it down (located in the top pane) so that it only shows me the essential trend changes. This one indicator could make you money all by itself. You are a genius, Chris.) Stochastic RSI (again, looking for a cross of the two lines, to indicate a change of trend) www.investopedia.com MFI (also very useful in crypto, called the Money Flow Index). www.investopedia.com THE FOURTH PANE HAS A STACKING INDICATOR I FOUND THAT PUTS MANY TOGETHER (Thanks Sigma Draconis) RSI / Stoch / SRSI / MFI / Aroon Overlay
Education
by Ifyouonlyknew
2
EDUCATION: Money Flow Index (MFI)Hello, dear subscribers! The topic of this article is Money Flow Index Strategy (MFI). Definition This is the oscillator type indicator, which looks like RSI, but takes in account the volume. Thus it demonsrates not only the price momentum, but also the money volume. It is calculated as a ratio of the positive or negtative money volume divided by the total money flow. MFI indicates the overbought and oversold conditions. The asset is overbought when its value is above 80 and oversold, when below 20. The strategy Let's take a look at how to execute the long positions. Initially we should make sure that the market is in global uptrend now. For this purpose we will use the 200 period SMA. If the price is above the SMA, which has a positive slope the market is in uptrend now. The second step is the bullish hidden divergence identification. As we told in the previous education article the hidden bullish divergence with the oscillators means the uptrend continuation. The third point of this analysis is that the asset now is in oversold zone according to MFI.
Education
by Skyrexio