Money Flow Index Indicator (MFI)

Money Flow Index Indicator (MFI)

Money Flow Index indicator for MT4 shows forex trading signals based on oversold, overbought and convergence, divergence

The Money Flow Index (MFI) indicator for MT4 shows the flow of money into and out of a trading instrument. However, the indicator uses trading volumes as a key parameter. The indicator is an oscillator and resembles the classic RSI – Relative Strength Index. As the indicator is an oscillator it produces overbought and oversold Forex trading signals. Additionally, the indicator produces divergence and convergence-based trading signals. So, Forex traders can benefit from trading both technical strategies.

The indicator suits well for new and advanced Forex traders. New traders can benefit from the overbought and oversold trading signals. On the other hand, advanced technical traders can benefit from convergence and divergence trading and apply complex Forex trading strategies. The indicator works well in all intraday timeframes as well as the daily, weekly, and monthly charts.

Money Flow Index Indicator For MT4 Trading Setup

The above chart shows the Money Flow Index indicator for MT4 in action. The indicator is an oscillator and plots the values in the BLUE line. Moreover, the indicator plots the upper level of 80 and lower level 20 and displays it in a separate indicator window.

The indicator is an oscillator and Forex traders consider the 80 levels as oversold and the 20 as an overbought level. So, technical traders can apply overbought and oversold trading strategies similar to other oscillators.

If the indicator reaches an overbought level of 80 traders should expect the price to reverse and become Bearish. So, traders can place a SELL trade with stop loss above the previous swing high. The best take profit is to wait for the prices to hit oversold conditions.

Similarly, if the indicator reaches an oversold level of 20 traders should anticipate the price to be Bullish. So, traders can enter the market with a BUY position with a stop loss below the previous swing low and exit at the opposite signal.

Divergence And Convergence Trading Signals

The above EURJPY H4 chart shows the divergence and convergence trading signals. The indicator provides the best trading signals as the mismatch of price and indicator values happens frequently and coincides with the peaks. Therefore, Forex technical traders can apply divergence and convergence trading strategies

If the price continues to make higher highs while the indicator makes lower highs it indicates the possible price reversal from bullish to bearish. So, Forex traders can enter a SELL position with a stop loss above the previous swing high.

Similarly, if the price makes lower lows, while the indicator makes higher lows it indicates the price reversal from Bearish to Bullish. So, traders can place a BUY position and enter the market with a stop loss below the previous swing low.

Conclusion
The MFI indicator for MT4 provides technical trading signals in multiple methods. However, for best results oversold and overbought conditions and divergence and convergence must be confirmed using price action and additional technical indicators. The indicator provides reversal signals, that are prone to false signals. So, they should be confirmed with other technical tools and support, resistance, channels and trend lines. Additionally, Forex traders can download the indicator for free and install them easily.