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For the most part. RSI tracks price change
Posted on: June 18, 2019 at 23:21:30 CT
scif MU
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...and momentum. MFI adds volume to the mix, so a price change on low volume won't have the same effect as the same price change on high volume. I think the MFI is a little smoother and easier to see highs and lows. Sometimes it will give a signal earlier, but sometimes later. I like it a little better, just because I already can see the price action, but factoring volume into the mix without such a tool is hard to see at a glance. If you go to Stockcharts.com, you can enter several indicators to show with the chart; so, you can see the RSI and the MFI next to each other. They are used the same way. Each has overbought/oversold ranges which can be significant, especially once the indicator leaves that range. For each, you can look for divergences, ie. the price rising or going sideways while the indicator is falling over time would a sign of weakness and possible trend change (and vice versa). So, I doubt you would have to think much differently in interpreting the indicator. I just think that the MFI makes moves easier to read. Here are a couple of paragraphs from the Stockcharts site's Chart School section on MFI:
As a volume-weighted version of RSI, the Money Flow Index (MFI) can be interpreted similarly to RSI. The big difference is, of course, volume. Because volume is added to the mix, the Money Flow Index will act a little differently than RSI. Theories suggest that volume leads prices. RSI is a momentum oscillator that already leads prices. Incorporating volume can increase this lead time.
Quong and Soudack identified three basic signals using the Money Flow Index. First, chartists can look for overbought or oversold levels to warn of unsustainable price extremes. Second, bullish and bearish divergence can be used to anticipate trend reversals. Third, failure swings at 80 or 20 can also be used to identify potential price reversals. For this article, the divergences and failure swings are be combined to create one signal group and increase robustness.
As a volume-weighted version of RSI, the Money Flow Index (MFI) can be interpreted similarly to RSI. The big difference is, of course, volume. Because volume is added to the mix, the Money Flow Index will act a little differently than RSI. Theories suggest that volume leads prices. RSI is a momentum oscillator that already leads prices. Incorporating volume can increase this lead time.
Quong and Soudack identified three basic signals using the Money Flow Index. First, chartists can look for overbought or oversold levels to warn of unsustainable price extremes. Second, bullish and bearish divergence can be used to anticipate trend reversals. Third, failure swings at 80 or 20 can also be used to identify potential price reversals. For this article, the divergences and failure swings are be combined to create one signal group and increase robustness.
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For the most part. RSI tracks price change - scif MU - 6/18 23:21:30