The Market Facilitation Index (MFI) is the creation of Bill Williams. The indicator endeavors to establish the effectiveness of price movement by computing the price movement per volume unit. This is accomplished by subtracting the days low from the high and dividing the result by the total volume. (See below)
Analysis
As an indicator on its own the MFI is of no significant value. Nonetheless, if the current price candles MFI and volume are compared to the previous candles MFI and volume, the index starts to have some significant tradable data.
The four possible groupings of MFI and volume were termed Green, Fade, Fake and Squat by Williams.
Green: The MFI increases and the volume increases. This means that the amount of participants entering the market increases, therefore the volume increases and the fresh incoming players align their positions in the direction of candlestick growth. Notice the long solid candles in the candlestick chart which indicates that the trend has begun and is picking up speed. (See candlestick chart)
Fade: The MFI falls and volume falls. It means that the market participants are indifferent and the price movement is small on small volumes. This usually happens at the end of a trend. (See candlestick chart)
Fake: The MFI increases, but the volume falls. It is highly likely that the market is being supported by broker speculation and not any significant client volume.
Squat: The MFI falls, but the volume increases. In this particular situation bulls and bears are fighting between themselves to see who will dominate the next trend. These battles are noticeable by the large sell and buy volumes. However, the price does not change appreciably since the strengths are equal. One of the competing parties either the buyers or the sellers will ultimately triumph in the battle. Usually, the fracture of such a candle indicates if this particular candle determines the continuation of the trend, or terminates the trend.