money flow index meaning

The Money Flow Index is RSI weighted by turnover — each bar’s gain or loss is multiplied by the rupee value traded before the ratio is calculated, so heavy days count for more than quiet ones. Like RSI it runs from 0 to 100. Its value lies less in the level than in how far it sits from RSI, because that gap shows whether money actually followed the price move.

the indicator that weights each bar’s volume by where the bar closed inside its own range is called

Chaikin Money Flow. Its multiplier is ((close − low) − (high − close)) ÷ (high − low), so a close at the high scores +1 and counts the full day’s volume as accumulation, a close at the midpoint scores 0, and a close at the low scores −1 and counts the volume as distribution. Averaged over several weeks the indicator reads somewhere between −1 and +1.

what does it mean when money flow falls while price makes a new high

It means price is climbing on lighter money than the move suggests — a rally getting thinner, with fewer rupees behind each new high. It is a warning rather than a signal: such divergences persist for months inside genuine uptrends, so the reading is normally used to lower conviction rather than to conclude that a top is in.

how much daily turnover does a stock need before volume indicators are meaningful

There is no official threshold, but below roughly ₹2 crore of daily turnover a volume signal is better treated as anecdote than evidence. When a whole day’s volume can be two or three participants, “money flow” is measuring a handful of decisions rather than a market. That is exactly where these indicators are most popular with retail traders and least reliable.

how do I tell if today’s volume was unusual for a stock

Relative volume — today’s volume divided by its own 20-day average — expresses the session as a multiple rather than a raw number, so 0.7× means it ran on less than three-quarters of normal participation. It answers a narrower question than the money flow indicators do: not the direction of participation, only whether today specifically was out of the ordinary.

Money flow: when turnover disagrees with price

Price tells you where a stock closed. Volume tells you how many people cared. Money flow indicators combine the two to ask a sharper question: was the move backed by real money, or did it drift up on nobody in particular?

Think of it like this

The shop with no customers

A shopkeeper raises prices by 20% and the board outside says so. Whether that is good news depends entirely on whether anyone is still buying. If the shop is empty at the new price, the board is describing an aspiration.

In the market

A stock at a new high on a third of its usual volume has raised its price with nobody in the shop. The high is real; the demand behind it is not yet demonstrated.

Two ways of counting the money

Indicator	How it works	Range	Best used for
Money Flow Index	RSI weighted by turnover: gains and losses are multiplied by the rupee value traded	0 to 100	Spotting when price momentum is not matched by money
Chaikin Money Flow	Weights each bar's volume by where it closed inside its own range, then averages	−1 to +1	Telling accumulation from distribution over several weeks
On-balance volume	Adds the day's volume on an up close, subtracts it on a down close	Unbounded	The long-run direction of participation, not the level
Relative volume	Today's volume against its own 20-day average	A multiple	Whether today specifically was unusual

Accumulation and distribution

Chaikin Money Flow is built on one observation: where a bar closes inside its own range says something about who won the day. A stock that traded from ₹100 to ₹110 and closed at ₹109 had buyers in control at the end. The same range closing at ₹101 did not, whatever the day looked like on a line chart.

Money flow multiplier = ((Close − Low) − (High − Close)) ÷ (High − Low)

Close at the high: Multiplier of +1 — the full day's volume counts as accumulation
Close at the midpoint: Multiplier of 0 — the day says nothing
Close at the low: Multiplier of −1 — the full volume counts as distribution

Example: A big-volume day that closed near its low counts as distribution even though the day was green for most of the session — which is precisely the day a price-only chart hides.

◆ Your call

The quiet high

A midcap you hold makes a new 52-week high. RSI reads 68. MFI reads 51 and has been falling for three weeks. Relative volume on the breakout day was 0.7×.

Check yourself

A stock rises 4% on a day with a wide range, closing near the session low, on twice its average volume. What does Chaikin Money Flow record?

◆ Checkpoint

Module checkpoint: testing what you believe

5 questions. Answers are revealed once you submit all of them.

1.Which error typically doubles a backtested return?

2.A stock rose 18% while the NIFTY rose 22%. What happened?

3.Why does a 50% drawdown need a 100% gain to recover?

4.What is the strongest test of a seasonal claim?

5.MFI is falling while RSI rises and price makes new highs. What does that describe?

0 of 5 answered

Simple bhasha mein

Dukaan mein grahak hai ya nahi

Dukaandaar bhaav 20% badha ke board laga de — baat tab hai jab us bhaav pe koi khareed bhi raha ho. Naya high bana par volume aadha matlab bhaav toh badha, khareedne wala koi nahi. Price chart yeh nahi batata, money flow batata hai.

What to remember

Money flow asks whether turnover backed the move, not just whether price rose.
The gap between MFI and RSI carries more information than either level.
Chaikin weights volume by where the bar closed inside its own range.
Divergence lowers conviction and tightens stops; it does not reverse positions.
Below roughly ₹2 crore of daily turnover, volume signals are anecdote.

You reached the endMark it done and keep your streak going.

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Common questions

Short, direct answers to what people ask about this topic.

money flow index meaning: The Money Flow Index is RSI weighted by turnover — each bar’s gain or loss is multiplied by the rupee value traded before the ratio is calculated, so heavy days count for more than quiet ones. Like RSI it runs from 0 to 100. Its value lies less in the level than in how far it sits from RSI, because that gap shows whether money actually followed the price move.
the indicator that weights each bar’s volume by where the bar closed inside its own range is called: Chaikin Money Flow. Its multiplier is ((close − low) − (high − close)) ÷ (high − low), so a close at the high scores +1 and counts the full day’s volume as accumulation, a close at the midpoint scores 0, and a close at the low scores −1 and counts the volume as distribution. Averaged over several weeks the indicator reads somewhere between −1 and +1.
what does it mean when money flow falls while price makes a new high: It means price is climbing on lighter money than the move suggests — a rally getting thinner, with fewer rupees behind each new high. It is a warning rather than a signal: such divergences persist for months inside genuine uptrends, so the reading is normally used to lower conviction rather than to conclude that a top is in.
how much daily turnover does a stock need before volume indicators are meaningful: There is no official threshold, but below roughly ₹2 crore of daily turnover a volume signal is better treated as anecdote than evidence. When a whole day’s volume can be two or three participants, “money flow” is measuring a handful of decisions rather than a market. That is exactly where these indicators are most popular with retail traders and least reliable.
how do I tell if today’s volume was unusual for a stock: Relative volume — today’s volume divided by its own 20-day average — expresses the session as a multiple rather than a raw number, so 0.7× means it ran on less than three-quarters of normal participation. It answers a narrower question than the money flow indicators do: not the direction of participation, only whether today specifically was out of the ordinary.