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Money Flow - can you use hourly charts?

Al_1Al_1 ✭
in Market Analysis
I use money flow indicators, MFI, On Balance Volume and Accumulation Distribution to give me information on the strength of a move. A buddy told me, strongly, that you can't use hourly charts for these indicators. Is he right. If so why. Thanks for taking a moment to reply.

Comments

  • markdmarkd mod
    As far as I know, you can add any technical indicator to an intraday chart for any interval - 1 minute, 5 minute, etc. They will display whatever parameters you choose and update with each bar using data for that time frame. Whether they mean anything (with default or custom parameters) is a different question, which you will have to settle for yourself. Your buddy is at least half right - you cannot SCAN for any of these indicators on an intraday time frame.

    Well, that's only half true. If you run a scan in the daily time frame during market hours, the scan engine considers data from the most recent update (e.g. 1:33 pm) to be the last update for the day. So every other data item in the indicator calculation will represent the actual last data update for each prior day, but the last data item will represent only part of a day. So let's say that scan gives you a signal to enter. By the end of the day, that last value could be different and NOT produce a signal.
  • Al_1Al_1 ✭
    I think his point is that the hourly money flow indicators don't mean anything. That makes no sense to me.
  • markdmarkd mod
    edited April 2017
    @Al_1 Well, he may believe that the extra high volume in the opening and closing hours distorts the indicators' signals. I put them on a several month hourly chart of IBM and OBV and AccDist seem to behave normally. That is, higher price highs over several days without higher indicator highs appear to forecast an eventual price decline. MFI might need a different parameter - probably longer than the default - maybe 32 or 33, to represent a week of hours? Just guessing.

  • Al_1Al_1 ✭
    That makes sense. Appreciate the help. The guy is a 'star' on Twitter & when I posted an hourly money flow chart on IWM, he said you can't use hourly charts for money flow. When I responded back and asked for an explanation, he said to find out for myself. Nice Guy. But thanks. I will continue to use accum distr & OBV on hourly charts. The MFI indicator is sometimes helpful for over bought-oversold decisions.
  • Al_1Al_1 ✭
    Interesting. Changing the parameters of MFI to 32 converts it essentially to OBV.
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