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Money flow is a tool used by technical analysts to calculate the approximate total dollar volume traded on a stock in a given day. Money flow is calculated by averaging the stock’s high, low and closing price for the day and then multiplying that by the number of shares traded that day. By comparing today’s money flow number with yesterday’s number an investor can see whether today’s money flow was positive (higher) or negative (lower). Money flow is used by technical analysts to judge the momentum of daily price changes. The money flow index (or MFI) is a calculation of money flow over several days. The money flow index is used to judge the relative strength of a price movement – weakness in the money flow index at a time when a stock makes a new high may indicate a weakness in the market and a pending reversal. |
