volume to determine if an asset is under purchasing or selling pressure.</p>\n<p>Purchasing pressure can be indicated when there is an <strong>unusual rise in price</strong> showing a positive money flow. Selling pressure, on the other hand, can be indicated when there is an unfavorable fall in price showing a negative money flow.&nbsp;</p>\n<p><strong>The sum of positive and negative money flows</strong> creates a money flow ratio (often known as a money ratio). This ratio is used to determine the MFI, and it ranges from 0 to 100. Since it uses volume and price, it can be used to predict both &ndash; price peaks and troughs.</p>\n<h2>What Is the Purpose of the Money Flow Index (MFI)?</h2>\n<p>When it comes to studying a divergence in an asset's chart, the MFI is one of the most effective tools for that. A divergence occurs when the MFI oscillator moves in the opposite direction of the price, indicating that the present <strong>price trend is reversing</strong>. Because of the risk of a price reversal, experienced traders avoid opening deals when an asset is overbought.</p>\n<p>MFI is linked closely to the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-relative-strength-index-rsi/">Relative Strength Index (RSI)</strong></a>. However, they are not the same because the MFI indicator, <strong>unlike the RSI</strong>, takes volume into consideration. Many market analysts prefer MFI to RSI because it provides more timely signs and warnings of impending reversals.</p>\n<h2>What Is the Best Setting for Money Flow Index (MFI)?</h2>\n<p>There are various MFI settings that depend on traders but <strong>the most recommended one</strong> is setting the <span style=\"color: #169179;\">overbought signal line to 80</span> and the <span style=\"color: #169179;\">oversold signal line to 20</span>. When an asset is traded above its <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-intrinsic-value/">intrinsic or fair value</strong></a> &ndash; it is <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-does-overbought-mean/">overbought, and when it is traded at a lower price &ndash; it is <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-oversold/">oversold.

/n

Money Flow Index (MFI) Formula</h3>\n<p><img title=\"Glossary: Money Flow Index formula.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/glossary-money-flow-index-formula-623adfca8599a.o.jpg/" alt=\"Glossary: Money Flow Index formula.\" width=\"427\" height=\"61\" /></p>\n<p><em>Where:</em></p>\n<p><img title=\"Glossary: Money Flow Ratio, Raw Money Flow, and Typical Price formulas.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/glossary-money-flow-index-other-formulas-623adfcb55d44.o.jpg/" alt=\"Glossary: Money Flow Ratio, Raw Money Flow, and Typical Price formulas.\" width=\"412\" height=\"150\" /></p>\n<p>However, note that even though the MFI is a pretty reliable indicator, it can still provide you with <strong>some misleading information</strong> due to the lack of movement in the price action of an asset in the buying window.</p>\n<p>Besides, the signals about price reversal indicated with MFI might not be very consistent all the time which is why you should consider using other technical indicators (like <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-on-balance-volume-obv/">OBV indicator</strong></a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-aroon-indicator/">Aroon indicator</strong></a>, RSI, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-moving-average-convergence-divergence-macd/">MACD, etc.) additionally.</p>","level":"medium","meta_title":"What is Money Flow Index (MFI)? 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Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"nextSection":{"id":511,"original_id":null,"author_id":41,"translator_id":null,"title":"What is Mempool?","slug":"what-is-mempool","section":"M","keyword":"Mempool","status":"published","definition":"a mechanism for network nodes to store the information about all unconfirmed transactions.","content":"<p>A <strong>mempool</strong> is a mechanism that network nodes use to store information on all unconfirmed transactions. It is the storage area for transactions that are yet to be added to a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-block/">block.

/n

If the nodes wish to submit a transaction to the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-miner/">miners, they must first relay it throughout the network. The mempool is then used to temporarily store all <strong>pending transactions</strong>. By looking at the mempool, a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-node/">node can decide whether the information on a new transaction will be relayed or not.</p>\n<p>The number of mempools is equal to that of the network nodes. Not all nodes receive the same transaction information simultaneously, and some nodes may store more information than others. Throughout the network, the nodes have different capabilities of temporary transaction storage due to hardware differences.</p>\n<p>As a result of these differences, <strong>all nodes maintain their own renditions of pending transactions</strong>. This leads to a variety of mempool sizes as well as the number of unconfirmed transactions logged on different sources.</p>\n<p>When a new valid block is sent to a node, the mempool is cleared of all transactions that match the ones logged in the block, as well as transactions with mismatched inputs. This can significantly reduce the mempool size.</p>\n<p>Users running a network node have no financial incentives and may have issues finding dedicated hardware. The mempool can often reach the RAM limit, which <strong>leads to the node crashing</strong> and restarting with a cleared mempool in the older <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoin (BTC)</strong></a>&nbsp;versions.</p>\n<p>In updated versions, if the mempool size is close to reaching the RAM capacity, the node starts the process of a minimal fee threshold. Transactions with fees per kB below the threshold are automatically removed from the mempool. Only new transactions that meet the fee per kB threshold are stored.</p>","level":"easy","meta_title":"What is Mempool? Definition & Meaning | Crypto Wiki","meta_description":"Mempool meaning: Mempool - a mechanism for network nodes to store the information about all unconfirmed transactions.","meta_keywords":null,"language":"en","created_at":"2022-03-23T06:45:57.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-mempool"},"prevSection":{"id":501,"original_id":null,"author_id":40,"translator_id":null,"title":"What is Mnemonics?","slug":"what-is-mnemonics","section":"M","keyword":"Mnemonics","status":"published","definition":"are a type of memory device that with information retention and retrieve memories.","content":"<p>Mnemonics can be rhymes, abbreviations, or songs.</p>\n<p>From a cryptocurrency perspective, mnemonics are <strong>a bunch of words</strong> (typically above 12) that are created at the same time a new <strong>crypto <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-wallet/">wallet is created. The main goal is to make sure that if an event takes place where a password gets lost, the wallets can still be accessed.</p>\n<p>In cryptocurrency, there are two sorts of mnemonics - <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-mnemonic-phrase/">mnemonic phrases</a> and mnemonic passes</strong>. To mention a few acronyms, a mnemonic phrase is also known as <strong>a seed key, mnemonic seed, and recovery seed.</strong></p>\n<p>When a new crypto wallet is created, users are recommended to write down a mnemonic phrase (12, 18, or 24 syllables long) on a piece of paper and keep it somewhere secure. Therefore, this prevents users from being blocked out of their crypto wallets.</p>\n<p>There are several apparent advantages to utilizing a mnemonic phrase, such as the <strong>enhanced protection of the crypto wallet that is automatically easier to keep</strong>.</p>\n<p>Mnemonic passes also known as seed extensions or mnemonic extensions, are an additional security feature based on mnemonic phrases that serve as <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-two-factor-authentication-2fa/">two-factor authentication</strong></a> for the crypto wallet.</p>\n<p>However, it can get very complicated to retrieve information about a cryptocurrency wallet since it works in a decentralized and private manner. This is where mnemonics come in handy. They can be employed to retrieve information.</p>","level":"easy","meta_title":"What is Mnemonics? Definition & Meaning | Crypto Wiki","meta_description":"Mnemonics meaning: Mnemonics - are a type of memory device that with information retention and retrieve memories.","meta_keywords":null,"language":"en","created_at":"2022-03-22T14:01:31.000000Z","updated_at":"2022-05-13T14:32:23.000000Z","preview_url":"https://www.bitdegree.org/crypto/learn/crypto-terms/what-is-mnemonics"},"currentChapter":"M","currentSection":"what-is-money-flow-index-mfi","chapterTitle":"M","readingLevel":"medium"},"url":"/crypto/learn/crypto-terms/what-is-money-flow-index-mfi","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">

Crypto Terms: Letter M

What is Money Flow Index (MFI)?

Money Flow Index (MFI) MEANING:
Money Flow Index (MFI) - a technical indicator that uses price and volume to determine if an asset is under purchasing or selling pressure.
Medium
2 minutes

Let's find out Money Flow Index (MFI) meaning, definition in crypto, what is Money Flow Index (MFI), and all other detailed facts.

Money Flow Index (MFI) was developed by Avrum Soudack and Gene Quong as an indicator that uses price and volume to determine if an asset is under purchasing or selling pressure.

Purchasing pressure can be indicated when there is an unusual rise in price showing a positive money flow. Selling pressure, on the other hand, can be indicated when there is an unfavorable fall in price showing a negative money flow. 

The sum of positive and negative money flows creates a money flow ratio (often known as a money ratio). This ratio is used to determine the MFI, and it ranges from 0 to 100. Since it uses volume and price, it can be used to predict both – price peaks and troughs.

What Is the Purpose of the Money Flow Index (MFI)?

When it comes to studying a divergence in an asset's chart, the MFI is one of the most effective tools for that. A divergence occurs when the MFI oscillator moves in the opposite direction of the price, indicating that the present price trend is reversing. Because of the risk of a price reversal, experienced traders avoid opening deals when an asset is overbought.

MFI is linked closely to the Relative Strength Index (RSI). However, they are not the same because the MFI indicator, unlike the RSI, takes volume into consideration. Many market analysts prefer MFI to RSI because it provides more timely signs and warnings of impending reversals.

What Is the Best Setting for Money Flow Index (MFI)?

There are various MFI settings that depend on traders but the most recommended one is setting the overbought signal line to 80 and the oversold signal line to 20. When an asset is traded above its intrinsic or fair value – it is overbought, and when it is traded at a lower price – it is oversold.

Money Flow Index (MFI) Formula

Glossary: Money Flow Index formula.

Where:

Glossary: Money Flow Ratio, Raw Money Flow, and Typical Price formulas.

However, note that even though the MFI is a pretty reliable indicator, it can still provide you with some misleading information due to the lack of movement in the price action of an asset in the buying window.

Besides, the signals about price reversal indicated with MFI might not be very consistent all the time which is why you should consider using other technical indicators (like OBV indicator, Aroon indicator, RSI, MACD, etc.) additionally.