V.7:10 (365-368): Market Facilitation Index Charles F. Wright
Product Description
Market Facilitation Index
Charles F. Wright
The Market Facilitation Index (MFI) is an objective means of measuring facilitation of trade which, in its simplest terms, means how well the market is working efficiently. An efficient market is very liquid and both short- and long-term investors are actively trading, from the locals in the pit to commercials and speculative traders.
A market that is not facilitating trade is generally a one timeframe market, dominated by short-term oriented locals. Volume is low and there is very little activity from the longer term traders and investors. The locals simply run the price up and down, looking for stops and waiting for the external paper to enter the market.
The MFI formula divides the range of the current price chart bar by the volume of the same bar. MFI may be used for all time periods from five minutes up to daily and weekly charts. It is acceptable to use either total tick volume or actual volume on daily and weekly charts and, of course, tick volume on intraday charts. The only requirement is consistency on the daily and weekly charts—do not switch back and forth.
A typical MFI calculation on an S&P 500 30-minute bar chart is:
...
The Market Facilitation Index (MFI) is an objective means of measuring facilitation of trade which, in its simplest terms, means how well the market is working efficiently. An efficient market is very liquid and both short- and long-term investors are actively trading, from the locals in the pit to commercials and speculative traders.
A market that is not facilitating trade is generally a one timeframe market, dominated by short-term oriented locals. Volume is low and there is very little activity from the longer term traders and investors. The locals simply run the price up and down, looking for stops and waiting for the external paper to enter the market.
The MFI formula divides the range of the current price chart bar by the volume of the same bar. MFI may be used for all time periods from five minutes up to daily and weekly charts. It is acceptable to use either total tick volume or actual volume on daily and weekly charts and, of course, tick volume on intraday charts. The only requirement is consistency on the daily and weekly charts—do not switch back and forth.
A typical MFI calculation on an S&P 500 30-minute bar chart is:
...
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