Money Flow Index Indicator MT4 | MT5

The MFI Indicator on MT4 is defined as a volume-weighted momentum indicator, that is used to analyze the strength of money flowing in and out of a security, helping traders identify whether buying or selling pressure dominates the market at a given time.

Similarly, on MetaTrader 5, this indicator ranges between 0 and 100 levels. Values above 80 typically indicate an overbought condition, suggesting that may be due for a potential price correction or potential reversal. While those below 20 signal an oversold market condition, implying that selling has occurred and a price rebound might be happen. Additionally, the MFI serves as an effective indicator that helps traders identify divergences and spot potential trend reversals.

The calculation of MFI involves:

• Money Flow Index = ( 1 - [ 1 / (1 + MFR ) ] ) * 100

Where;

• MFR (Money Flow Ratio) = Positive MF / Negative MF 
• Raw Money Flow = Typical Price × Volume
• Typical Price = (Close + High + Low) / 3

In the following two trading examples, using on MetaTrader, we will explore two different situations how to make the Money Flow Index Indicator useful in each one.

For the first example on metatrader 4, at the beginning of the uptrend, the market was in an oversold condition, with the MFI below the 20 level, signaling a long opportunity. As expected, the price moved upward. When the market reached its peak, it will prepare for a potential reversal. The MFI crossed below the 80 level, signaling a short opportunity, and the trend shifted to a downtrend.

For the second example on metatrader 5, near the end of an uptrend, the market entered an overbought condition. However, instead of reversing immediately, the price continued to rise while the MFI line declined. This divergence indicated a weakening trend. The trader, in this case, would anticipate an exit from the long position and prepare to enter a short position when the MFI rebounded off again from the 80 level. That’s exactly what happened and this indicator can be useful on this delicate situation.

For additional confirmation, consider using the RSI or MACD. You can also combine the MFI with the ZigZag Indicator to refine entry and exit points.