I was recently looking at the calculation for MFI - the money flow index.

The calculation is as follows (From Stockcharts):

  * 1. Typical Price = (High + Low + Close)/3
  * 2. Raw Money Flow = Typical Price x Volume
  * 3. Money Flow Ratio = (14-period Positive Money Flow)/(14-period Negative Money Flow)
  * 4. Money Flow Index = 100 - 100/(1 + Money Flow Ratio)

If you view the excel document, it displays a negative money flow as a day which has a lower typical price than the previous day's. Positive money flow is a day where the typical price has increased.

Now in my calculations I defined a positive money flow, when the closing price is higher (ie. a positive change) and a negative money flow, a day where the closing price is lower ( a negative change).

So which is correct, using TP or using change? and why?


The Wikipedia has an article on money flow index.

The article which you link to correctly uses the typical price. You state that you are comparing the closing prices, which is incorrect.

I'm making no statement on the validity of the money flow index itself, just answering your question.

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