Money Flow Index Trading Strategy – How to use Money Flow Index MFI Strategy Intraday Indicator Strategies.
Does Money Flow Index indicator trading strategy even work? Are online trading guru’s telling you false information? In this video i will back-test 100 times, a very famous trading strategy called the Money Flow Index indicator strategy. Yes you heard it right. testing 100 times takes time, and will most likely prove, if you should risk your hard earned money, using this strategy! This video will be very similar to the CCI and MACD video i made a while ago. If you want to know if those strategies work after testing 100 times? Check those videos out.
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. If you have never heard about this Money Flow Index indicator, check out my previous video where i explain this indicator in detail.
Like I said in my last video, This Indicator 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.
Also, In my last video, I said money flow index is not that good, when used as an entry signal generator. But it is good, if we use it to identify the overbought and over sold zone. Like I said, I am still going to test the Money Flow Index 100 times as an entry signal generator, to show it’s real win rate.
The creators of this indicator, recommended to use the 90 and 10 levels as overbought and oversold levels, instead of 80 and 20.
So, in this video, I have used 90 as the overbought level, and 10 as the oversold level.
Here’s how most traders will enter trades using Money Flow Index alone.
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.
Now, If you have watched my previous videos, you know I use the 200 period moving average to find the trend direction, and to filter out false signals. We only look to buy, when price and entry signal is above the 200 period moving average. And only look to sell, when price is below the 200 period moving average.
But in this video, I have not used it. It’s because, with 90 and 10 as the overbought and oversold settings, Money Flow Index doesn’t give a lot of entry signals. Furthermore, when it does give an entry signal, most of the time the price is on the other side of the moving average. In simple words, most of the time, when the Money Flow Index gives a buy entry signal, the moving average is indicating a downtrend, and vice versa. If you use the default 80 and 20 Money Flow Index settings, you will get entry signals with the 200 period moving average. But since the creators of this indicator recommended 90 and 10 settings, I have used 90 and 10.
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