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The Money Flow Index is similar to the Relative Strength Index except that it is Volume weighted. The Index measures the Value Traded on Up Days and the Value traded on down days. The resulting index can be used as an indicator to trend weakness as well as an indicator to overbought and over sold levels.
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As mentioned the MFI can be used as a divergence indicator as illustrated above, and it can be used to highlight overbought and oversold levels. These generally occur at the 80% and the 20% levels respectively. |
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