How It Works
- Compute the 14-bar Money Flow Index: the same 0-100 scale as RSI, but each bar's move weighted by the money that changed hands on it.
- Buy when MFI climbs back above 20 — selling pressure was heavy enough to exhaust the oversold zone and money is starting to flow back in.
- Sell when MFI pushes above 80, where buying volume has crowded in far enough to call the move overbought.
Worked example. A sell-off on heavy volume drags MFI to 14. The next bar lifts it to 23, crossing back above 20, so the strategy buys. The recovery draws steady buying until MFI prints 83 and the position is closed. A similar-looking dip on thin volume never pushes MFI below 20 at all — the volume weighting is what separates the two.
The Math Behind The Indicators
Everything runs on closing prices of the traded timeframe: P is a close, Pt today's close, and N counts bars — one bar is one candle of that timeframe, so 20 bars on a 1h chart is 20 hours.
- Money Flow Index (MFI)
- RSI with turnover attached. Each bar's typical price — the average of its high, low and close — is multiplied by volume to give the money that flowed that bar, counted as positive when the typical price rose and negative when it fell. The ratio of positive to negative flow over N bars is then squeezed onto the same 0-100 scale RSI uses. The difference matters: a slide nobody traded barely moves MFI, while the same slide on heavy volume drives it hard.
- MFIN = 100 − 1001 + MFR, MFR = ∑positive TP · V∑negative TP · V, TP = H+L+P3
- Example: Over 14 bars, money flowing in on up bars totals 3,000 and money flowing out on down bars totals 1,000. The ratio is 3, so MFI = 100 − 100/4 = 75 — approaching the overbought 80 line.
Example Chart
Example Chart
The Metrics
| Metric | Calculation | What it shows |
|---|---|---|
| Price Change % | change = Plast − P0P0 × 100 The traded market's own close against its first close over the same window, as a percentage. | What the market did while the rule was running — the benchmark every other row here is read against. A rule that made 40% in a market that made 120% lost to doing nothing. |
| Trades | N = count(closed positions) How many positions the rule opened and closed over the window. | The sample behind every other figure, and what the fees are charged on. Two rules with the same return are not the same rule if one took nine trades and the other took nine hundred. |
| Win Rate % | W%n = winsnn × 100 Of the first n trades, how many closed above the cash they opened with after fees. Plotted trade by trade, so the line is the rate so far rather than a final figure. | How often the rule is right, which is not how much it makes. A rule can win a third of its trades and still lead, if the third it wins pays for the two it loses. |
| Cumulative P&L % | PnL%n = n∑i=1(fi − 1) × 100 Each trade's percentage result added up, net of fees. A sum rather than a compounding, so a 10% gain and a 10% loss cancel. | What the rule returned per trade, with position size taken out of it. It answers whether the edge is in the trades themselves, where the equity curve answers what the account did with them. |
| Equity | En = E0 n∏i=1fi The account compounded through every trade — the whole balance goes into the next position. Drawn net of fees as a solid line and gross of them as a dotted one. | The account itself, which is the only figure a reader actually ends up with. The gap between the two lines is what the fees took, and it widens with every trade rather than staying a fixed share. |
| Cumulative Fees | Fn = n∑i=1(Ci φ + Xi φ) Fee charged on the way into each position and again on the way out, at rate phi, on the capital actually committed — so the bill grows with the account as well as with the trade count. | The cost of trading, in the account's own units. It is the one line here that only ever rises, and the one a rule cannot trade its way out of. |
| Rolling Sharpe | Sharpet = mean(rdaily)sd(rdaily) × √365 Mean daily return over its deviation, annualized on a 365-day year because crypto has no weekend. Taken on the account marked to market every bar — open positions included, not just closed ones — and read off at each trade's exit. | Return per unit of the swing it took to get it. It is the heaviest weight in the composite score, because an account that doubled calmly and one that doubled violently are not the same result. |