Calculate the money flow index

calculate the money flow index

Cash flow = average cost per day x Year
Now, for calculating the ratio of cash flow should be separate cash flows for the period in positive and negative. If the price is a certain day, this is considered "positive cash flow." If the price closed, it is considered a "negative cash flow."
Cash flow Ratio = Positive Money Flow / Negative Money Flow

This is Money Flow Ratio that is used to calculate the money flow index. The flow of money ranging from 0 to 100. Just as with the RSI, the shares are considered overbought in the 70-80 range and oversold in the 20-30 range.
The smaller the number of days you use, the more volatile the money flow is. The table below is for Home Depot (HD) and uses the 14-day average.
The MFI is identified by the green line. Note that each time the money flow dropped below 30, stocks began to rally. Furthermore, each time the money flow rose above 70, the stock began to sell them. Like any indicator, MFI is not correct 100% of the time.

Even in early October when the stock price fell from about $ 55 down to $ 37, the MFI did not discover anything. Just remember that money flow is useful to detect momentum, but it can not predict unsystematic risk.