A technical indicator developed by Dr. Bill Williams to evaluate the efficiency of the price movement. An efficient market is defined as a market when all traders (long-term and short-term) are actively trading. The indicator combines price and volume:
MFI = (High – Low) * Volume
There are 4 combinations:
- MFI Up and Volume Up (Green): Follow the direction of the market. The market is accelerating as more traders enter the market in the established direction.
- MFI Down and Volume Down (Brown): Both MFI and Volume fade, resulting in no interest to advance further.
- MFI Up and Volume Down (Blue): Price movement without volume confirmation. It is a fake move.
- MFI Down and Volume Up (Pink): The most important signal. The increased volume signifies the increased number of participants entering the market. The squat as Bill Williams named it, implies a reversal or continuation of the prevailing trend.