Understanding the Market Facilitation Index (BW MFI) for Better Trading Decisions

The Market Facilitation Index (BW MFI) is a unique technical indicator that helps us understand price changes for each tick. While the absolute values are not particularly meaningful on their own, it’s the changes in the indicator that we should pay attention to.

Market Facilitation Index, BW MFI

According to Bill Williams, there’s a significant relationship between the MFI and trading volume:

MFI rises and volume rises: This indicates that new traders are entering the market, and they are likely taking positions in the direction of the current price movement. In other words, the trend is gaining momentum.
MFI falls and volume falls: When both the MFI and volume decrease, it shows that market participants are losing interest.
MFI rises while volume falls: This scenario suggests that price changes are not being backed by client volume, indicating that fluctuations may be driven by speculative moves from brokers and dealers.
MFI falls but volume rises: Here, we see a tug-of-war between buyers and sellers, with significant trading activity but little change in price. This stalemate indicates that one side will eventually prevail, and a breakout from this type of bar can signal whether the trend will continue or reverse. Bill Williams refers to this as a "curtsying" bar.

Calculating the Market Facilitation Index
To calculate the BW MFI, you’ll subtract the lowest price from the highest price of the current bar and divide that by the volume.

BW MFI = RANGE * (HIGH - LOW) / VOLUME

Where:

RANGE — a multiplier that adjusts the price differences to whole numbers;
HIGH — the highest price of the current bar;
LOW — the lowest price of the current bar;
VOLUME — the trading volume for the current bar.

Further Reading
For a comprehensive look at the BW MFI, check out the Technical analysis: Market Facilitation Index.

Understanding the Market Facilitation Index (BW MFI) for Better Trading Decisions

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