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Money Flow Index: Length (um, why 14) and Time Period (um, what's best)?
Started:March 28th, 2013 (02:31 PM) by aventeren Views / Replies:514 / 4
Last Reply:March 28th, 2013 (06:32 PM) Attachments:0

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Money Flow Index: Length (um, why 14) and Time Period (um, what's best)?

Old March 28th, 2013, 02:31 PM   #1 (permalink)
Patient Discipline
Bellingham, WA USA
 
Trading Experience: Beginner
Platform: NT
Broker/Data: Mirus (Broker), Continuum (Data), Dorman (Clearing)
Favorite Instrument: Futures
 
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Posts: 145 since Mar 2013
Thanks: 362 given, 86 received

Money Flow Index: Length (um, why 14) and Time Period (um, what's best)?

Howdy; I've been searching around the interwebs, and I have not been able to find a coherent discussion of why the default Money Flow Index calculation period length is 14 and if MFI is better at certain time intervals (ie, intraday, daily, weekly, monthly, etc).

Does anyone have any insight into why the default period length is 14 (either personally or via a reference)?

Also, along the same lines, does anyone have a read on the optimal time interval? Given that MFI is trying to find institutional money flows, which may happen over longer time horizons, my initial predilection is to only use >day time intervals, but I was curious what everyone else thought, too.

Thanks!

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Old March 28th, 2013, 03:48 PM   #2 (permalink)
Elite Member
fairfax, va
 
Trading Experience: Intermediate
Platform: ninja
Favorite Instrument: ES
 
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Posts: 3,939 since Jun 2009
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There was an old man named J. Welles Wilder,
he suggested using 14 periods for good charting,
folks have been using it ever since.

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Old March 28th, 2013, 06:03 PM   #3 (permalink)
Patient Discipline
Bellingham, WA USA
 
Trading Experience: Beginner
Platform: NT
Broker/Data: Mirus (Broker), Continuum (Data), Dorman (Clearing)
Favorite Instrument: Futures
 
aventeren's Avatar
 
Posts: 145 since Mar 2013
Thanks: 362 given, 86 received


Thanks, Cory; I'll go read up on why Wilder recommended 14 periods.

I was messing around with the MFI time period after I posted this, and it seems that it does a fairly decent job of indicating overall trend predication when the time period is blown out to >50, however when it is 10-20 time periods, it seems like it just produces a lot of noise.

Also, given that the MFI was largely created to attempt to track when institutional money moved into or out of an issue and that these large institutions may often take months to accumulate their positions, using a longer time period certainly will catch these instances of institutional money moving in over months (rather than days).

I guess it should also be noted, that I first became interested in the MFI after my reading of Birinyi, who advocated that the MFI be used as a running measure of the money flow (rather than an average over a period of time). Upon further investigation, the MFI study used in ToS doesn't even come close to what Birinyi championed (ie, individual trade by individual trade analysis), as the ToS MFI study just uses a simple average of the high, low and close to generate the "money flow". Therefore, clearly this "retail" version of (average) money flow misses much of what Birinyi espoused (ie, a directional volume weighted measure of money flow).

I sure wish I could access trade data (price ($/share) and volume (# shares)) per each individual trade so that I could build a proper MFI measure...any ideas on how to do that?


cory View Post
There was an old man named J. Welles Wilder,
he suggested using 14 periods for good charting,
folks have been using it ever since.


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Old March 28th, 2013, 06:31 PM   #4 (permalink)
Elite Member
fairfax, va
 
Trading Experience: Intermediate
Platform: ninja
Favorite Instrument: ES
 
cory's Avatar
 
Posts: 3,939 since Jun 2009
Thanks: 467 given, 4,105 received

here are some researches;
TraderFeed: Daytrading Stocks With Money Flow Patterns
TraderFeed: How You Can Track The Stock Market's Large Traders

and they lead to
https://www.bigmiketrading.com/ninjatrader/5312-relative-volume-indicator.html
indi link at the end.

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Old March 28th, 2013, 06:32 PM   #5 (permalink)
Patient Discipline
Bellingham, WA USA
 
Trading Experience: Beginner
Platform: NT
Broker/Data: Mirus (Broker), Continuum (Data), Dorman (Clearing)
Favorite Instrument: Futures
 
aventeren's Avatar
 
Posts: 145 since Mar 2013
Thanks: 362 given, 86 received

Excellent; I'm diving in now. Thanks!




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