GEN: Money Flow

[Joe Frabosilio <joe6964@xxxxxxxx>]

Hi,

I've received a lot of email asking me how money flow is calculated and
used.  I will do my best to answer everyone's questions in this one
post.  If I didn't answer your question or still have any more questions
email me direct.

Warning if not interested hit the delete key now.

I first learned of Money Flow while I was at cbs.marketwatch.com a
couple of months ago.  The story was how this fund manager was beating
the Dow and S&P for years.  (I forgot the funds name and managers name.)

Money Flow is basically the money flowing into and out of a stock.
Example: if a stock quote is
36 X 36 1/16 now if someone buys 1000 shares at 36 1/16 ($36,062.5),
then someone sells only 500 shares at 36 ($18,000) the result is
+$18,062.5. Showing that there is bigger money going in than out.  And
the price of the stock will go up over the next couple of days(suppose
to).

This fund manager used this like one would use RSI, setting parameters
of 20-80.  20 for a buy signal and 80 for a sell.   He said he used a
period of 14.  This is not the only indicator he used thou.  (He didn't
mention the other indicators.) I found that using a period of 14 was to
slow for me and a period of 3 was to fast.  I like to work with a period
of 5.

The software I use is Windows on Wall Street for Dow Jones end of day,
and Real tick III for real-time data(Nasdaq level II).

But there are some flaws in using this with penny stocks.  Example: if a
stock quote is 3 X 3 1/16, and someone buys at market and gets filled at
3 1/8 and now people who buy at 3 1/16 the realtime money flow indicator
will show money is leaving the stock, when people are buying.  With
bigger stocks like AMAT, AMD, IBM etc I haven't seen this problem as
bad.  So this indicator is more trust worthy with bigger stocks.

What really set the spark for me with this indicator is when I combined
it with the Whiplash setup out of Street Smarts.  While combineing the
two I was able to better predict  if the stock would gap up or not.

I hope this helpful.

Trade Well,
Joe Frabosilio