Today, we consider you a for Binary Options Indicator How The money flow index (Money Flow). He refers to the indicators that determine the volume of traded assets. This tool Technical Analysis It determines the interest of traders in the asset. It is best used in the analysis Commodities and stocksAs volumes accurately calculated. But the currency pairs should be considered errors.
Tune Index indicator of cash flows very simple
As you can see, it is displayed in a separate window below the chart. It has the kind of curve. Money Flow Index ranges of numbers of up to 0 100. It has its own oversold zone - 20and overbought zone - 80.
The indicator itself is calculated step by step:
- Is determined by the typical price for the required period and the value of cash flows. It can be positive (if the typical price is higher than that of the previous period) or negative (if the typical price is lower than that of the previous period).
- Then the cash flows related to each other, receive cash ratio. As it is already determined by the digital value itself Money Flow Index.
The live graphics display best used for opening deals not with the trend, but rather against the trend when the market changes its direction. That's what signals should be sought on the chart:
- If the curve rises above the overbought line (above the level 80), it is expected that the market will unfold, and the value of the asset starts to fall in the near future;
- If the curve is below the oversold line (lower level 20), it is expected that the market will unfold, and the value of the asset will start soon grow;
- Another signal is the situation of divergence. This is where the line indicator is growing, and the price of the asset at the same time falls. Or vice versa, the indicator line is falling, and asset price increases at this time. This suggests that the expected reversal of the asset.
Experienced pros often supplement this indicator with their trading strategy, since they consider it one of the best tools with which you can determine market activity. He is able to accurately determine the intensity of sales and purchases.
By its principle of operation, it is similar to many other oscillators, it has a scale and overbought and oversold zones 80 and 20, respectively.
Since the Cash Flow Index has its own trading characteristics, it is important to consider them in order to increase the percentage of profitable transactions:
- choose a timeframe for market analysis not younger than the 1 hour. On 1, 5 or 15-minute timeframes, the oscillator generates more false signals, so it is better to be patient and wait for them to appear on higher timeframes, although their number will be several times smaller.
- zones can be changed: 30 and 70 will cause the number of received signals to be increased, but their quality is degraded. I recommend to try 10 and 90, in this case there will be much more profitable signals.
- Money Flow Index is best combined with other trend indicators. Ideal fit moving averages or Bollinger Bands.
It is recommended to follow the rules of money management when concluding transactions on signals from a cash flow index:
- The transaction amount should not exceed 1% of the deposit on the signals that come from overbought and oversold zones.
- in terms of divergence, the probability of success of a transaction is higher, therefore it is allowed to increase its size to 2-3%.
- If a simultaneous signal on divergence and overbought / oversold occurs, you can increase the amount of the deal to 5%.
Despite the similarity of the Money Flow Index on the RSI, the first one has higher signal accuracy due to the fact that it applies not only cost, but also trading activity.
