Using Market Facilitation Index - MFI you will be able to recognise two important metrics:
Whether the current trend is strong enough to trade it. When a new trend may start.
MFI combines changes in price (range) and volume. Here is the formula:
MFI = (High – Low) * Volume
The indicator has bars of four colours. Each colour has a specific meaning and shows how the market responds to a change in volume.
Green. A green bar forms in the situation that both MFI and the volume are up. It means that more and more traders join the market in the current direction. In other words, it points to a strong trend, so you can open trades in line with this trend.
Brown. A brown bar appears when both MFI and the volume decline. It is also called “fade”. It signals that traders are hesitating and don’t want to continue the trend anymore. As a result, it’s not recommended to join the trend. Several brown bars are a sign of the potential reversal of the trend.
Blue. A blue bar forms when MFI increases, but the volume declines. A spike in price may be short-lived a precede a change in the trend. Blue bars appear at the times when newbies enter the trend, but professional traders know that it’s already too dangerous.
Pink. A pink bar, also known as squat, appears when MFI is diminishing, but the volume is growing. It reflects an increase of trading interest and an active fight between buyers and sellers. After one of the sides wins, the price will likely make a big move breaking support or resistance levels. The MFI, however, can’t be used to determine the direction of the breakout.
Hi Daniel, been playing around with this and looks to be a great tool! I just have a question regarding the format of the bars, I seem to always end up with long blue bars and then the rest are very short and hard to see, switching to log scale helps a bit and it is less of a problem with certain instruments but still quite difficult to read a lot of the time, what am I doing wrong?
tmx21
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@echo_charlie, MFI is a indicator created by Bill Williams, should only be used with his tradesystem. Trading Caos is the book where he explains it.
abnersinthe
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Great Indicator. This might help some after the color update:
Market Facilitation Index by Bill Williams
4 possible combinations of MF Index and Volume are:
GREEN: Green: MF Index increases and the volume increases. This means that the number of participants entering the market increases, therefore the volume increases and the fresh incoming players align their positions in the direction of candlestick growth.
A green bar forms in the situation that both MFI and the volume are up. It means that more and more traders join the market in the current direction. In other words, it points to astrong trend, so you can open trades in line with this trend.
RED: Fade: MF Index falls and volume falls. It means that the market participants are indifferent and the price movement is small on small volumes. This usually happens at the end of a trend.
A red bar appears when both MFI and the volume decline. It is also called “fade”. It signals that traders are hesitating and don’t want to continue the trend anymore. As a result, it’s not recommended to join the trend. Several red bars are a sign of the potential reversal of the trend.
BLUE: Fake: MF Index increases, but the volume falls. It is highly likely that the market is being supported by broker speculation and not any significant client volume.
A blue bar forms when MFI increases, but the volume declines. A spike in price may be short-lived a precede a change in the trend. Blue bars appear at the times when newbies enter the trend, but professional traders know that it’s already too dangerous.
PINK: Squat: MF Index falls, but the volume increases. In this particular situation bulls and bears are fighting between themselves to see who will dominate the next trend. These battles are noticeable by the large sell and buy volumes. However, the price does not change appreciably since the strengths are equal. One of the competing parties either the buyers or the sellers will ultimately triumph in the battle. Usually, the fracture of such a candle indicates if this particular candle determines the continuation of the trend, or terminates the trend.
A pink bar, also known as squat, appears when MFI is diminishing, but the volume is growing. It reflects an increase of trading interest and an active fight between buyers and sellers. After one of the sides wins, the price will likely make a big move breaking support or resistance levels. The MFI, however, can’t be used to determine the direction of the breakout.
Javohir29
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hi bro. Please make a script, otherwise you cannot install more than 2 indicators on the basic tariff. Make a script so that it contains: Alligator, Fractal, AO and MFI
modax0
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Thank you for this great indicator. very useful .
JoshuaMcGowan
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thx!
Will_Okafor
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what does a white bar indicate ?
viet80118
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Hi Daniel, can you add alerts when pink or blue bar show up? Many thanks