✔️ Information reviewed and updated in May 2024 by Eduardo López
The liquidity of a market is essential when determining which asset is convenient for us to invest. That is why the money flow ratio turns out to be so important when making decisions to buy or sell assets.
✨ What is the money flow rate? ✨
You must know that the money flow index reflects the changes that may exist in the flow of money and liquidity of assets. For this, data such as the typical price, maximum, minimum and closing price are used to determine said flow.
Usually, it is the same platform which is responsible for making this calculation, since it is necessary to have access to different statistics and data. By calculating it automatically, you don't have to complicate your life with this process, you will get the indicator quickly.
✨How to interpret it? ✨
This indicator is relatively simple to understand, as it is very similar to the RSI. If the money flow index crosses 80, this means that the asset is overbought so we must wait for it to decrease.
On the contrary, if the index falls below number 20, this means that we must wait for the asset to recover to invest. Thus, we can know when it is convenient and when not to perform certain actions such as buying or selling.
