Money flow analysis is a financial analysis technique used to evaluate the inflow and outflow of capital in a particular asset, market, or financial instrument. It provides insights into whether money is moving into or out of an asset, helping investors and traders identify trends and make informed decisions.

Key Concepts in Money Flow Analysis

1. Money Flow: It represents the movement of funds into or out of a financial asset. Positive money flow indicates buying pressure, while negative money flow suggests selling pressure.

2. Money Flow Index (MFI):

The MFI is a popular technical indicator that combines price and volume to assess whether an asset is overbought or oversold. It ranges between 0 and 100:

Above 80: Overbought (possible price reversal or pullback).

Below 20: Oversold (potential buying opportunity).

3. Calculation of MFI:

Calculate the Typical Price (TP) for each period:

TP = \frac{\text{High} + \text{Low} + \text{Close}}{3}

Raw Money Flow = TP \times Volume

If the TP of the current period is greater than the previous period, it's a positive money flow. Otherwise, it's negative