How is the Money Flow Ratio (MFR) calculated?

How is the Money Flow Ratio (MFR) calculated?

• A. By dividing the total volume by total price movement
• B. By summing all PMF and NMF and dividing PMF by NMF
• C. By assessing the average price over a specific period
• D. By averaging closing prices over a week

Answer: (B)

The Money Flow Ratio (MFR) is calculated by dividing the Positive Money Flow (PMF) by the Negative Money Flow (NMF). Positive Money Flow is derived from the volume of transactions that occurred on days when the price closed higher, while Negative Money Flow comes from the volume on days when the price closed lower. By summing all positive and negative money flows over a designated period and then calculating the ratio of PMF to NMF, traders can assess the strength of purchasing pressure compared to selling pressure in a given security. A higher MFR indicates a stronger buying interest, while a lower MFR suggests selling pressure may dominate, making this method crucial for understanding market sentiment and potential price movements.

The Money Flow Ratio (MFR) is calculated by dividing the Positive Money Flow (PMF) by the Negative Money Flow (NMF). Positive Money Flow is derived from the volume of transactions that occurred on days when the price closed higher, while Negative Money Flow comes from the volume on days when the price closed lower. By summing all positive and negative money flows over a designated period and then calculating the ratio of PMF to NMF, traders can assess the strength of purchasing pressure compared to selling pressure in a given security. A higher MFR indicates a stronger buying interest, while a lower MFR suggests selling pressure may dominate, making this method crucial for understanding market sentiment and potential price movements.