The Money Flow Index (MFI) is a momentum indicator that incorporates both price and volume to measure buying and selling pressure. It's similar to the Relative Strength Index (RSI), which only considers price. The MFI ranges from 0 to 100 and helps traders identify overbought or oversold conditions, typically using values above 80 (overbought) or below 20 (oversold). The formula for MFI involves calculating the typical price for each period, then multiplying this by the volume to determine the money flow. Positive and negative money flows are compared, and an MFI value is generated based on the ratio of these flows.

While both MFI and RSI are momentum oscillators, the main difference lies in the use of volume in the MFI. The RSI relies purely on price movement, making it less sensitive to volume changes. The inclusion of volume in the MFI allows it to provide additional insight into the strength behind price movements. For example, a rising price accompanied by low volume might result in a lower MFI compared to the RSI, signaling weak buying pressure.

In contrast, RSI may be more responsive in markets with lower volume, where price action is the primary driver. Traders often use MFI and RSI together for a more comprehensive view, where MFI can confirm or contradict RSI signals by adding the context of volume to the analysis.

The Money Flow Index (MFI) is a technical indicator that measures the flow of money into and out of a security over a specific period. It uses both price and volume data to identify overbought or oversold conditions, helping traders anticipate potential trend reversals. The MFI ranges from 0 to 100, with readings above 80 indicating overbought conditions and below 20 indicating oversold conditions. It’s also known as a volume-weighted Relative Strength Index (RSI).

While the MFI and RSI both gauge momentum, the key difference is that the MFI incorporates trading volume, whereas the RSI only uses price movements. As a result, MFI can provide additional insights when volume is a significant factor in price changes. For example, strong price moves with low volume might not trigger the same MFI signals as those with higher volume, making it a useful tool for volume-sensitive traders.