Bill Williams Market Facilitation Index (WMFI) indicator is a combination of volume and price movement. its show 4 different bar for different periods and indicate period volume and price position.
volume and price position means it will show the combined value of price and Volume. And tell you when the volume is increasing or decreasing and when the price is rising and falling.
Market facilitation index setting
- Scale factor: The default scale value is 6.
- Green: this is the color of volume and price increases bar. When both price and Volume increasing then green Bar will be formed
- Fade: This is the color for when volume and price both are decreasing.
- Fake: This is the color for when the price is rising and volume is decreasing.
- Squat: this is the color for when the price is falling and volume is increasing.
How market facilitation index works
WMFI indicator shows 4 color bars and tells you price and Volume activities. The green bar, Fade bar, Fake bar, Squat bar.
- Green Bar: when price and volume both are increasing then the green bar will be formed.
- Fade Bar: When price & volume both are decreasing then the Fade bar will be formed.
- Fake Bar: when the price is rising and volume is decreasing then the fake bar will be formed.
- Squat Bar: when the volume is increasing and the price is falling then squat Bar will be formed.
What WMFI indicator tells you
- Green bar tells you price and Volume are increasing which means share price can rise more. and this is the stronger price movement.
- Fade bar indicates price and volume are decreasing which means traders have less interest in stocks.
- Fake bar indicates the price is rising and volume is decreasing which means weaker price rising. And the share price may reverse soon.
- Squat Bar tells you price is decreasing and Volume increasing that means share price uncertainty in the share price.
Calculation
Market facilitation index indicator calculation is the subtraction of period high and low then divided the result by tick volume.
Market facilitation index formula is = (High – low) / tick volume.
Market facilitaion index trading strategy
while using the WMFI indicator you can use other indicators also. below the strategy is a combination with the MACD indicator. so first read the MACD indicator first then read this. otherwise you will not understand.
- you can use the MACD indicator with the WMFI indicator, so that when Green Bar is forming in the WMFI and also the MACD line is crossing the signal line then you can buy a share.
- when the Fade bar is forming and signal Line is crossing the MACD line then you can sell the share.
- if the fake or squat bar is forming then you can avoid trading.
Conclusion
Market Facilitation Index is the price and volume base indicator, this indicator will form 4 types of the bar which tells you
- volume and price both increasing when volume and price both decreasing.
- The only price is increasing and volume is decreasing.
- the only volume is increasing and the price is decreasing .
*Read Related Post for More information.