Guide · Volume & money flow
Does Volume Flow Indicator work?
Across 373 stocks, Volume Flow Indicator cut the worst fall on 81%, beat buying and holding on risk-adjusted return on 21% and on raw return on 19%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
A refined on-balance volume that ignores tiny price moves and caps freak volume spikes. Hold while it is above zero.
- Each day's volume counts as buying if the typical price (the average of high, low and close) rose by more than a small cutoff, as selling if it fell by more than the cutoff, and as nothing otherwise. The cutoff is 0.2 times the stock's recent daily volatility.
- Volume is capped at 2.5 times its 130-day average. The VFI is the 130-day sum of the signed volume divided by average volume, smoothed over 3 days.
- In when the VFI is above zero.
- Out when it is below zero.
Volume & money flow plays bet that volume shows conviction. The family guide
How to use it
- Expect to be wrong more often than right: only 32% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Real estate (37% beat holding on risk-adjusted return) and worst on Financials (4%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Volume Flow Indicator did best against holding in the 2008 crash (+24% median gap) and worst in the 2020–21 rally (−17%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Volume Flow Indicator | +24% | −7% | 0% | −17% | +4% | −9% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Real estate | 37% | -0.03 |
| Semiconductors | 32% | -0.09 |
| Media & telecom | 30% | -0.09 |
| Software & devices | 29% | -0.07 |
| Healthcare | 22% | -0.17 |
| Industrials & rentals | 22% | -0.11 |
| Industrials & materials | 20% | -0.15 |
| Metals & mining | 20% | -0.11 |
| Energy & power | 19% | -0.16 |
| Sectors | 17% | -0.11 |
| Big tech | 17% | -0.10 |
| Consumer & retail | 15% | -0.14 |
| Indexes & ETFs | 14% | -0.11 |
| Financials | 4% | -0.09 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Volume Flow Indicator holds 219 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.