The Market Facilitation Index by Gary Hoover
Here's how trader Gary Hoover uses the Market Facilitation Index for day trading.
Applying technical analysis to developing trading signals begins with the investigation of price movement and often incorporates volume studies to improve trading accuracy. The Market Facilitation Index (MFI) is one indicator that synthesizes both price and volume analysis. The MFI is the ratio of the current bar's range (high-low) to the bar's volume.
MFI = range/volume
The MFI is designed to gauge the efficiency of price movement. The efficiency is measured by comparing the current bar's MFI value to the previous bar's MFI value. If the MFI increased, then the market is facilitating trade and is more efficient, implying that the market is trending. If the MFI decreased, then the market is becoming less efficient, which may indicate a trading range is developing that may be a trend reversal. Then, the indicator is used by comparing both the volume and the MFI of the current bar to the previous bar.