MFI Reversal Indicator MT5

MFI Reversal Indicator MT5

Introduction

The Money Flow Index (MFI) is a powerful technical indicator that combines price action and volume data. It helps traders identify potential trend reversals by measuring the flow of money into and out of a security. In this guide, we’ll delve into the key features of the MFI Reversal Indicator for MT5 and discuss an effective trading strategy.

Overview

• Indicator Name: MFI Reversal Indicator MT5
• Purpose: Predicting reversals in the market
• Oscillation Range: 0 to 100
• Conditions: Overbought and oversold levels

Key Features

1. Volume-Weighted Oscillator: Unlike some momentum-based indicators, the MFI considers both price and volume. It can be thought of as a volume-weighted Relative Strength Index (RSI).
2. Overbought and Oversold Signals:
   • Overbought: MFI above 80
   • Oversold: MFI at 20 or below
3. Divergence Signals:
   • Bullish Divergence: Price creates lower lows while MFI creates higher lows (uptrend)
   • Bearish Divergence: Price creates higher lows while MFI creates lower lows (downtrend)

Trading Setup

• Timeframe: H1 (1-hour chart)
• Currency Pair: EURUSD

Strategy

1. Overbought Reversals (Cool-Off in Uptrend):
   • When MFI reaches the overbought level (above 80), anticipate a potential reversal.
   • Consider a SELL trade:
     • Set a stop loss above the previous swing high.
     • Exit when prices reach oversold conditions.
2. Oversold Reversals (Cool-Off in Downtrend):
   • When MFI approaches the oversold level (around 20), expect an upward reversal.
   • Consider a BUY position:
     • Set a stop loss below the previous swing low.
     • Exit on the opposite signal.

Minimum Deposit

• The MFI Reversal Indicator MT5 can be used with various account sizes, but a reasonable minimum deposit would be around $500 to $1,000.