Market Facilitation Index
The Market Facilitation Index (MFI), developed by Bill Williams, measures the price movement per unit of volume, indicating how efficiently the market is facilitating price change and whether market participants are committed to the current move.
Bill Williams's Market Facilitation Index is conceptually straightforward: it measures how much price moved per unit of volume traded. A high MFI value indicates that each unit of volume was efficient in moving price — the market was 'facilitating' movement. A low MFI indicates that price moved very little despite significant volume, or a great deal of volume was required to achieve a small price move — inefficient price facilitation.
The MFI formula is (High - Low) / Volume. The raw output is a small decimal for most stocks (for example, if the bar range is Rs 5 and volume is 1,000,000 shares, the MFI is 0.000005 rupees of range per share of volume). In practice, the indicator is typically multiplied by a large constant for display purposes, or charted as a histogram with the focus on bar-to-bar changes rather than absolute levels.
Williams used the MFI in conjunction with volume to create four interpretive combinations based on whether each of MFI and Volume is higher or lower than the prior bar. These four combinations each carry a specific name and interpretation in Williams's framework:
Green (MFI up, Volume up): Price is being driven by fresh, committed volume — the market is actively facilitating movement. This historically suggests continuation of the current direction.
Fade (MFI down, Volume up): High volume is failing to move price, indicating possible absorption — a large counterparty may be absorbing the aggressive orders without allowing price to progress. This historically signals potential reversal.
Fake (MFI up, Volume down): Price moved on low volume — likely a false or weak breakout with limited transactional conviction. The move may not be sustained.
Squat (MFI down, Volume down): Price and volume both contracted — the market is quiet and undecided. Williams considered the Squat the most interesting bar because he observed that the next significant move (in either direction) historically tended to start from a Squat bar, making it a setup for an impending expansion.
In Indian markets, the MFI is most analytically valuable on daily charts of liquid NSE stocks and index futures, where volume data is reliable and complete. On low-volume mid-cap stocks, the indicator can be distorted by erratic single-trade volume spikes.