Trading requires the use of tools that help the trader make accurate decisions by observing price change keenly. The Market Facilitation Index helps traders by measuring the weakness or strength of factors affecting the movement of price. This specific oscillator is quite effective because it provides traders with insight to trade when a price trend is strong enough, and when not to trade. The oscillator assesses the size of price moves and alerts traders by using color-coded bars to signal trend strength. Depending on the relationship between changes in price unpredictability and trading volume, the Market Facilitation Index provides traders with color signals.
To use it properly when trading, it is important to know what different colors mean so that you can make informed trading decisions. These color-coded bars are: (Try out indicators on Tradingview.com)
This bar suggests that there is an increase in the number of traders entering the market in the direction of a current price move that is gaining strength.
This particular color alerts the trader that other traders are losing interest in a current price trend and its end may be looming.
It is also known as the fake bar because it indicates disconnection between price moves and trade volume. It alerts the trader that price moves are unlikely to be long- standing.
Pink BarMarket Facilitation Index | Indicator Series Click To Tweet
This shows that traders are eager to enter the market, even though the market at that time is not yet clear in its direction.
The Market Facilitation Index provides clues on how the market is responding to volume change. Unlike the Market Facilitation Index, the Money Flow Index identifies oversold or overbought signs in a particular asset. This oscillator moves between 0 and 100, whereby a reading below 20 means that the asset is oversold. Both oscillators focus on price and volume.
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