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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: Susan G who wrote (47909)7/1/1999 12:42:00 PM
From: SAMS BONE  Read Replies (1) of 120523
 
in order of "weighted flow" heres the explaination

Standard Money Flow algorithm:
The usual “blind” algorithm to get the daily money flow simply calculates

the change in equity
Example:
Closing price is 10
Stock was trading mostly around 9 1/2.
At the end of the day there is one trade at 10 1/8 for 100 shares.
The usual algorithm would take the 1/8 increase and multiply and conclude:
today money was flowing into the stock,
which is wrong because most of the day it has traded below the closing price
(meaning money flowing OUT).

RIM Weighted Money Flow algorithm:
RIM will use a more sophisticated method to calculate the money flow,

which takes the price AND the volume into account.
Example:
Stock XYZ has currently 10 mill shares with the last closing price of 12$.
The current equity is 10mill* 12$ = 120 Mill $.
Now the following trades take place:
Trade DayFlow/Total Comment
1000 @ 12: 0 no mony in or out, just change of owner
1200 @ 12 1/4 +300$/+300$ now 1200 x 0.25=300$ have been added to equity
1600 @ 12 1/8 +200$/+500$ now another 200$ added, 500 total so far
1600 @ 11 3/4 -400/+100$ now 1600x.25=400$ have been take out

overall day balance still positive at +100$
1000 @ 11 7/8 -125/-25 now 1000x-0.125=-125$ have been take out,
overall balance is now at -25$
3000 @ 11 1/2 -1500/-1525 big money flow out 3000x.5=-1500
... and so on accumulating the day flow.

RIM will normalize the dollar amount of the day flow by dividing at against the total equity!
One million$ flowing into MSFT is nothing, but could signify a large investment into a smaller stock.

The next day the closing price is then set to 11 1/2 and the flow is calculated from there.
The new equity is now 10mill * 11 1/2=115 Mill $.

Since the day flow is usually very small compared to the entire equity
37.684 million$ money flow compared to 4.55448 billion$ resluts in 827% (instead of 0.827%).

(C) Copyright 1998 Burkhard Eichberger, Professional Software Solutions, 1626 N.Wilcox Suite#252, Los Angeles, California 90028, %date
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