Money Flow Theory ("True ignorance is not the absence of knowledge but the fact of refusing to acquire it" | Karl Popper)


“In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a path to opportunity, it's a prerequisite. Education is something that we must keep looking for day after day” | Barack Obama

The basics: Typical price = (high+low+close)/3 raw cash flow = a typical price times the volume Cash flow ratio = (14-period positive cash flow)/(14-period negative cash flow) Cash flow index = 100-100/(1 + Cash flow ratio)

First, note that the raw cash flow is basically the dollar amount, since the formula is the volume times the typical price. Raw Money Flow is positive when the typical price is moving up one period over another, and negative when the typical price is moving down. Positive money flows suggest prices are likely to go up, whereas negative money flows indicate prices are likely to go down. A bullish divergence occurs when prices are moving toward lower bottoms, but an indicator is creating higher bottoms, indicating an improvement in the flow of money or momentum.


"The main cause of financial difficulties is fear and ignorance, not the economy or the government of the rich. Self-inflicted fears and ignorance keep people trapped" | Robert Kiyosaki

This indicator divides net positive money flow by net negative money flow, and graphs the values as a line, which traders can compare with a securities price to determine levels of overbought and oversold. The money flow index (MFI) is another commonly used indicator by traders to analyze trading prices and trading volumes to determine overbought and oversold levels (excess buying and selling). Money flow can also be determined by trade volume multiplied by transaction price (dollar volume), with money flow being considered positive when a trade occurs in a rising trend, and negative when a subsequent trade is purchased in a declining trend. When the trade occurs at a higher price than the previous trade, the difference is considered positive money flow.


"In school we are taught that mistakes are bad, and we are punished for them. However, if you look at the way human beings are designed to learn, you will see that we learn by making mistakes. We learn to walk by stumbling. If we would never have fallen, we would never have learned to walk" | Robert Kiyosaki

The timing of the flow of cash in and out of the projects is used as an input to financial models, such as internal rates of return and net present value. Free cash flow is the cash flows above the amount required to finance all projects, which has a positive net present value after discounting for their respective capital costs. Cash flow analysis defines the companys working capital--the money available to conduct the operations of the business and complete transactions. A cash flow statement is just one of a number of financial statements that can be used to gauge the businesss financial health.


"When I was young I thought money was the most important thing in life, now that I'm older I know it is" | Oscar Wilde

A full suite of financial statements (decision tools) including a beginning and ending net worth statement, an income statement, a cash flow statement, an owners equity statement, and measures of financial performance are available for conducting a complete financial analysis of your business. Cash Flow Analysis helps your financial team manage cash inflows and cash outflows more effectively, making sure that you have enough cash available to operate -- and grow -- your business. It pays to practice cash flow management regularly, so your company has the cash it needs to continue operations.


"You only have a certain number of hours in a day and a limit for which you can work. So why work hard for money? Learn to make money and people work for you and you will be free to do things important" | Robert Kiyosaki

A positive operating cash flow and negative invested cash flow can mean that a business is making money and spending to grow. Investing cash flow is calculated by adding money received from selling assets, paying off loans, or selling stocks, and subtracting the money spent on buying assets, stocks, or loans that are in default.

In this framework, we use large data sets from firms bank accounts to understand money flows within the region-wide economy composed of firms and their supplier-client relationships. Information about network structures would be useful in the promotion of a regional economy, to observe overall flow in a network, and in the assessment of time-varying changes within the network.


"Winners are not afraid of losing. Losers are. Failure is part of the process of success. People who avoid failure also avoid success" | Robert Kiyosaki

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This is an informational article, I do not promote, endorse or recommend any particular investment, investments may not be suitable for everyone as the entire amount invested could be lost.

 

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