I cannot overemphasize the value of this indicator. It is a more truthful measure of market action than any stochastic, RSI Relative Strength Index or other momentum indicator.

In his book "Trading Chaos" Bill Williams introduces a new method of combining price and volume in order to see the true market development. The key role belongs to unique indicator called the Market Facilitation Index MFI.

BW MFI Bill Williams Market Facilitation Index uses a simple formula. What does efficiency means here? Should the interest of one large group of investors vaporize, the volume drops and from that point efficiency of the market goes down as well.

MFI can be used for all time frames from 5 minutes up to daily and weekly frames. Current BW MFI has been coded for MetaTrader 4 platform, however, other trading platforms might also have this indicator among trading tools.

To call it on MT4 charts: To ease the task of evaluating those changes, in MT4 we have MFI bars colored in 4 distinctive colors:. There are 4 possible combinations of MFI and Volume relationship, which are colored in BW MFI indicator with the following message to send:. Green MFI bar tells that the market is already on the move. On such green day you would already want to have an open trade in the direction of the market move.

If there were any trades left open, make sure they are not going against the market, otherwise they risk to bring losses.

Money Flow Index (MFI)

A Green MFI signifies three things: Brown MFI bar called Fade appears when market starts to fade — lose interest in advancing further. Often this can be observed at the end of a trend. Traders who used to actively participate in the market are no longer interested in establishing new positions at current price, which causes the market to fade both volume and MFI decrease.

Bill Williams brings as an example Elliott waves, where the fist Elliott wave in the sequence has a fade top - little action is happening, and the excitement of the market is dwindling. Yet, he says later, that boredom often precedes the beginning of a big move. Several brown bars in a row can perfectly illustrate the period where fading excitement is slowly building the base for a new market move. Blue MFI bar called Fake has been given its name for a reason. When market makes a progressive move, but this move is not supported by the volume for any reasonthis provides a clue that there are probably no real interest in the move yet, while certain group of market participants is trying to control and manipulate the market to their advantage.

This is the point when newbies can be easily scared out by sudden change in the dominant trend, which will cause them to close their existing trades and attempt to run with the new trend, which to their huge disappointment will be over as fast as it began, since it was not a real move backed up by volume, it was a "fake" move, controlled by a small but strong group of large market players.

Pink MFI bar called Squat appears at the end of each trend. Bill Williams calls it "the strongest potential money maker" of the 4 setups. The squat bar is marked by an increasing volume yet temporary stalling price movement.

Money Flow Index (MFI)

The key factor is: The breakout is going to be either seen as a reversal, or a continuation of a current trend. Either way, it is a good starting point to get in at the beginning of a trend. Interesting that equity options margin requirements has commented on this indicator yet? I have a feeling that this could be a veru useful indicator but I just don't get it.

I have it on my chart with the Traders Dynamic Indicator Compass FX how to buy stocks and shares lloyds a slow stochastic 8,3,3.

I've resarched this MFI until I'm blue in the face. I even read a fairly detailed article by Bill Williams himself. I still don't get it! Am I missing someting? Could you add anything that might selling shares tax nz the lightbulb on for me? I want to thank you very very much for explaining this important indicator, personnally i want to know more about it, can you advice me some other places where to find more on it, because i see that with more filter indicator this ccould be a support for any decision of a trade.

This is not the easiest of indicators to understand.

The Top Technical Indicators For Options Trading | Investopedia

As always, to an inventor Bill Williams the indicator is very useful in its every detail, but for us, followers, sometimes many things and, most important, the reasoning why this indicator was created - remains undiscovered. That's where you'll hear that following someone's system doesn't mean it'll work for you. The best way to learn about the indicator in depth is to read the original book "Trading Chaos" by Bill Williams, but don't look for easy answers there, it's the same complicated description as anywhere you look.

I will try to explain how I use it in conjunction with other trading methods. If you pull up this chart, you will see that thursday's candle was a doji which formed after somewhat of a downtrend. It also formed right on the weekly pivot and it was also an inside bar or harami if you wish to use candlestick jargon.

I short sell penny stocks with scottrade that this pair was going to reverse bullish and the last thing reporting requirements for stock options on w2 confirmed this sentiment was that the MFI was brown, meaning that further selling was unlikely.

I have charts posted on forexforums.

Forex indicators | Forex Indicators Guide

Just search for "price action" or sniper just so you can see it visually and also so you will know that I'm not monday morning quarterbacking. Thanks mfi forex trading the explanation, Considering that volume indicator reflexes the broker's trading volume only and not the whole market since it's not possible, In MFI make money with flatbed truck volume is essential part of its equation does that mean that MFI accuracy depends on brokers given volume accuracy?

The value of this indicator is as a confirmation Even so I would never trade without a fast moving ATR to verify volatility because volume does not always equal volatility. The BW MFI tries to combine the qualities of Volume and ATR into one indicator but, in my opinion it is not near as good using the OBV unrealised foreign exchange gains and losses ato ATR.

Again, thank you for providing a very good explanation of a very complex indicator. I have read the book and believe me, much complicated. Perhaps it works better on futures exchange since exact knowledge of volume and tick volume.

Please reply if I am wrong. This indicator can not be used alone, but must be accompanied by other indicators. What should be monitored and the most important of these indicators are green and pink, others simply viewed with a skeptic attitude. This was very frustrating initially, but eventually will be very useful to know the end of a trend.

Volume and tick volume is another thing, this is a different matter from MFI. I am a FMI indicator fan but it has to be used with other complementary indicators such HI-LOW of a FMI green bar less than 1. With that, you will have a bunch of winning transactions if you accept a 1: Obviously you need to have a good understanding of the basics of Forex first to enable you to interpret the MFI.

However, many traders not really understand the main explaination in the book BW Chaos Trading. That's why BW said the application is for advance trader In order to easy understanding the book, i suggest to read and understand the related signal on other indicators fibonacci, oscilator, etc. Compare this indicator with the volume indicator from the navigator menu in MT4. You will find that you can only get MFI green and pink bars in line with volume green bars.

Also MFI blue and brown bars line up with red bars on the volume indicator. As The height of each volume bar is compared with it's previous bar it gets colored red for lower and green for higher.

The MFI compares price movements with each previous bar and considers volume in it's color scheme. It's nothing more than a volume like indicator for price movement that includes volume action in it's color coding. Another possible indicator made from the MFI could be to have bull bars print above the zero line and have bear bars print below the zero line. I've been having problems with this indicator when a giant blue fake bar appears. These usually single giant bars squish the rest of the data into the zero line making the MFI unreadable until there are enough time periods to get rid of them.

Is there any MFI alternative out there that can remove these things? I'd rather see a shorter white bar or a short fat blue bar in it's place to note it's presence. I trade with just the Green UP Volume Line. All others ae blacked out on the color selection.

Using a 30 min. This gives me the trend,I go off the last bar traded. Usually you can get into the trend in it's earlier stage. It's working for me. Please read the chapter "Using fractals and leverage" from Trading Chaos by Bill Williams carefully, I think then you will be able to appreciate the usefulness of the indicator. Fractals, MFI and other Bill Williams indicators are perhaps the best indicators available.

I am a trader just like you all and I try to learn while I earn or loose I earn more though. Take my suggestion and put your mind on this strategy, you wont regret. I understand the indicator, i just don't really like it. Too many false indications. The MFI bar size shows price action similar to the volume indicator showing volume action.

Now all we need is to do chart the volume and histogram the price action with the MFI! This is an interesting indicator. What implications this would have I don't know but it would be fun to experiment with.