Market Facilitation Index BW MFI: description, adjustment and application

Technical Indicator Market Facilitation Index, BW MFI shows the price fluctuation fallen on one tick. Absolute values of the indicator do not have any meaning by themselves, only its changes make sense. Bill Williams attaches significance to the variation of indicator and volume:

Indicator Market Facilitation Index and volume have increased, it indicates that: a) more traders come into the market (volume is rising); b) just arrived traders open positions along with direction of the bar development, i.e. movement has started and races.

Indicator Market Facilitation Index has risen, but volume has been reduced. Market is not supported by the volume from the traders` side, and price is changing due to the speculations of traders "on the floor" (intermediaries – brokers and dealers).

Indicator Market Facilitation Index has decreased but volume has grown. Bulls and bears are fighting which is followed by big volume of sales and purchases but insignificant price fluctuations because of approximately equal strengths. One of two opposing forces (buyers against sellers) will win. Usually breakthrough of such bar informs whether this bar determines the trend continuation or trend is annulled by it. Bill Williams names this bar "curtsying".

Calculation

To calculate Market Facilitation Index you need to subtract the lowest bar price from the highest bar price and divide it by the volume.

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

Where:

RANGE - is the multiplication factor, which brings the difference in points down to whole numbers.