MFI + RSI
May 26, 2018
The MFI + RSI indicator combines the Relative Strength Index (RSI) and the Money Flow Index (MFI) into a single oscillator to help traders identify overbought and oversold conditions with both price momentum and volume data.
Usage
The Usage of this tool involves monitoring the interplay between price momentum (RSI) and volume-weighted momentum (MFI). Traders can look for convergences where both indicators reach extreme levels or divergences where price and volume flow disagree.
For example, when the MFI enters the overbought or oversold zones, the background can be highlighted to alert the user to potential exhaustion points. The RSI provides a secondary layer of confirmation for price action strength within those same zones.
Details
This script calculates the RSI using the standard HLC3 source and a user-defined period. The MFI is calculated by weighing price changes with volume over a specified length to determine the flow of money into or out of an asset. By overlaying these two distinct oscillators, the script provides a more comprehensive view of market sentiment than either indicator alone.
Settings
- MFI Length: Sets the lookback period for the Money Flow Index calculation.
- MFI Lower Bound: Defines the threshold for the MFI oversold zone.
- MFI Upper Bound: Defines the threshold for the MFI overbought zone.
- Highlight Oversold/Overbought?: Toggles the background coloring when MFI breaches its bounds.
- RSI Lower Bound: Defines the threshold for the RSI oversold zone.
- RSI Upper Bound: Defines the threshold for the RSI overbought zone.
- RSI Length: Sets the lookback period for the Relative Strength Index calculation.
FAQ
How do I interpret the background highlights?
The background highlights represent moments when the MFI has breached its upper or lower boundaries, suggesting high volume-weighted momentum that may lead to a reversal.
Can I change the source for the calculations?
The current implementation uses HLC3 (Typical Price) for both indicators to maintain consistency between price and volume-weighted data.
How do I access this script?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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