Money Flow Index Trading Strategy – How to use Money Flow Index MFI Strategy Intraday Indicator Strategies.

Can Money Flow Index strategy make you a profitable trader? How to trade it and make more money? What Money Flow Index Trading strategy is the right one? How to use this Money Flow Index indicator properly without blowing up our accounts? Lets find out.

Money Flow Index or MFI, is an oscillator that is very popular among traders. It shows the overbought or oversold conditions of a stock or Forex pair, using the price and volume. This indicator is very similar to the RSI. RSI indicator calculates its values based on the price data alone. But Money Flow Index takes both Price and Volume data into consideration. MFI indicator can also be used to spot divergences.

On Trading view, this is what the Money Flow Index looks like. It is very similar to the RSI indicator. By default RSI indicator comes with 30 and 70 oversold and over bought zones, but MFI indicator, will come with 80 and 20 over bought and over sold zones. Furthermore, the default length will be 14.

Here’s what the Money Flow Index tells you.
When the MFI indicator goes above the 80 level, the price is considered to be in an over bought zone. Similarly, If MFI indicator goes below the 20 level, the price is considered to be in an over sold zone.
Some traders use these over bought and over sold zones, as an entry signal generator.
If the price goes above the 80 level, some traders will look for opportunities to sell. They will look for a candlestick pattern that indicates a short signal. Similarly, If the price goes below the 20 level, some traders will look for opportunities to buy. Again, they will look for some kind of candlestick pattern that will indicate a possible uptrend. Some traders will use other indicators that give entry signals with the Money Flow index. Entry Signal generators are indicators such as the MACD and the Ichimoku cloud.

Since Money Flow Index also takes the volume into consideration, some traders use this indicator as an entry signal generator. Here’s how the basic money flow index strategy goes.
We should look to buy, when Money Flow Index is coming out of the over sold zone. Set your stop loss using the ATR indicator, or just set it below the swing low.
Similarly, we should look to sell, when the money flow index is coming out of the over bought zone. Again, Set your stop loss using the ATR indicator, or just set it above the swing high.
I have already made a video on the ATR indicator. It is one of the useful indicators when it comes to price volatility and stop loss. Check out my ATR video if you want to learn how to set the stop loss properly.
If you trade using Money Flow Index alone, you will get a lot of false signals, because it won’t show any kind of trend direction. If you take every MFI indicator signals, you might enter a short position, when the market is in a strong uptrend. Similarly, if you take all buy signals given by the Money Flow Index, you might enter trades against a strong down trend.
This problem can be solved by simply using the 200 period moving average. If price is above the 200 period moving average, we will only look to buy, and if the price is below the 200 period moving average, we will only look to sell. We will completely ignore the sell signals given by the Money Flow Index, when the price is above the moving average. Similarly, we will completely ignore the buy signals if the price is below the moving average.

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