The Market Facilitation Index (BW MFI) is a powerful technical indicator for MetaTrader 5 that helps traders understand price changes on a tick-by-tick basis.
While the absolute values of the MFI might not seem significant on their own, it’s the changes in the indicator that tell the real story. Bill Williams, the creator of this indicator, highlights the relationship between the MFI and trading volume:
- When MFI goes up and volume increases: This suggests that more traders are entering the market. New players are opening positions in the direction of the bar's movement, indicating that the trend is gaining momentum.
- When MFI falls and volume falls: This signals a lack of interest from market participants, often leading to stagnant price action.
- When MFI rises but volume decreases: This indicates that the price movement might not be backed by strong market participation, and could be driven by speculative activity from brokers and dealers.
- When MFI drops while volume rises: This represents a tug-of-war between buyers and sellers. Even though there's significant buying and selling volume, the price remains relatively stable. This scenario often leads to a breakout where one side gains the upper hand, highlighting a potential trend continuation or reversal, which Bill Williams refers to as a "curtsying" bar.
Market Facilitation Index Indicator
How to Calculate the MFI:
To compute the Market Facilitation Index, you can use the following formula:
BW MFI = (HIGH - LOW) / VOLUME
Where:
- HIGH: The maximum price of the current bar.
- LOW: The minimum price of the current bar.
- VOLUME: The volume of the current bar.
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