MFI indicator

MFI indicator

# Forex indicators , # Forex strategies

How to use the MFI indicator

MFI or Money Flow Index indicator, which in translation is a cash flow index. The cash flow index is one of the indicators of technical analysis. It strongly resembles RSI, however, it has a number of differences. The most important thing is that the MFI indicator takes into account the tick volume when calculating its values. The indicator shows the rate of price change, which can serve as a fairly reliable indicator of the future state of a financial instrument.

Professional traders believe that the MFI indicator is one of the most applicable indicators of technical analysis. This statement is based on the fact that the MFI indicator, by its nature (calculation formula), is quite reliable in calculating the financial flow invested in a particular asset. It doesn’t sound easy, of course, but it’s important to understand the following, if you see that large players are investing in the instrument, this means, most likely, that the instrument has growth potential. Therefore, since the main principle of trading is to buy cheaper and sell more expensive, we also want to enter the asset in this situation and get potential profit.

The MFI indicator calculates the difference between incoming and outgoing cash flows. If the average (base) value of an asset is lower than this difference, then this means that there is an increase in the incoming money supply (bull market). If we see the opposite, then investors are leaving the instrument (bear market).

Adding the MFI indicator in MT

The Money Flow Index indicator is included in the standard equipment of the MT4 and MT5 trading platforms. To add it to the chart of the trading instrument, open the “Insert / Indicators /” menu .

MFI Indicator Parameters

MFI or Money Flow Index indicator

You can set the period for which the “cash flow” is estimated, as well as the color scheme of the indicator.

Trading system

Trading on a cash flow index is very simple. When the indicator leaves the overbought zone – we sell, when the indicator leaves the oversold zone – we buy.

An example of a simple trading tactic is shown in the figure below.

Purchase transaction:

1. The indicator has moved up from the oversold zone, that is, above level 20;

2. At the opening of the next candle we buy;

3. Set Stop Loss 3-5 points below the previous extreme;

4. A deal can be closed both by a return signal and upon reaching important resistance levels.

For a sale transaction, the reverse is true.

A few simple rules in conclusion

Remember, there are no indicators on Forex that are not mistaken. The MFI indicator, like any others, requires confirmation of its signals. When building your own trading system, use several indicators.

Follow Mani Management. Never in one transaction risk more than 2 percent of your capital. This approach will protect you from ruin and allow you to consistently make money on Forex using the MFI indicator.

Follow your trading strategy clearly. If according to the strategy of the Cash Flow Index (MFI, Money Flow Index) it is necessary to open a deal – open it, if you record the result – fix it, and it does not matter if you are in the black. Only following the rules of the Cash Flow Index (MFI, Money Flow Index) “from and to” will allow you to earn.

Download Files

MFI indicator for MT4 can be downloaded here

MFI indicator for MT5 can be downloaded here

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To conclude a framework agreement, the client is obliged to confirm that he is familiar with the following risks associated with the conclusion, execution and termination of obligations under the framework and individual agreements:

1. The risk of loss to an individual as a result of changes in foreign exchange rates (currency risk).

2. The risk of loss to an individual as a result of non-performance, untimely performance or incomplete performance by the Forex dealer and (or) the bank in which the Forex dealer account is opened, financial obligations to such an individual in accordance with the terms of the Agreement and Separate Agreements (credit risk )

3. The risk of loss to an individual as a result of a violation of applicable law and (or) internal documents of a Forex dealer by employees of a Forex dealer, a malfunction (failure) of software and hardware of a Forex dealer and (or) individual, a mismatch of software and hardware of a forex dealer to the nature and volume of transactions it conducts, transactions by a third party on behalf of an individual as a result of receipt by such a person randomly or as a result of his deliberate actions of unauthorized access to the possibility of making such transactions on behalf of an individual, carrying out operations by an individual that are not in accordance with his intentions, for reasons related to insufficient experience of working with this individual with software and hardware of a forex dealer and (or) making it random actions, as well as the result of external events (operational risk).

Contracts or financial instruments proposed for conclusion are highly risky and may lead to the loss of the deposited funds in full. Before making transactions, you should familiarize yourself with the risks associated with them.

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