TA-Lib
doc error: MFI function should not has an *unstable* period
https://github.com/mrjbq7/ta-lib/issues/435
https://github.com/mrjbq7/ta-lib/blob/master/docs/func_groups/momentum_indicators.md
MFI - Money Flow Index
NOTE: The MFI function has an unstable period.
real = MFI(high, low, close, volume, timeperiod=14)
however, if we check the DESCRIPTION of TA_SetUnstablePeriod(https://ta-lib.org/d_api/ta_setunstableperiod.html).
and then how the MFI is calculated:
https://www.investopedia.com/terms/m/mfi.asp
How to Calculate the Money Flow Index
There are several steps for calculating the Money Flow Index. If doing it by hand, using a spreadsheet is recommended.
Calculate the Typical Price for each of the last 14 periods. For each period, mark whether the typical price was higher or lower than the prior period. This will tell you whether Raw Money Flow is positive or negative. Calculate Raw Money Flow by multiplying the Typical Price by Volume for that period. Use negative or positive numbers depending on whether the period was up or down (see step above). Calculate the Money Flow Ratio by adding up all the positive money flows over the last 14 periods and dividing it by the negative money flows for the last 14 periods. Calculate the Money Flow Index (MFI) using the ratio found in step four. Continue doing the calculations as each new period ends, using only the last 14 periods of data.
It's more like SMA, having look back period of 1 (compare 1st typical price is up/down with the prev typical price), rather than EMA (which will "remember" all the price effect on the current ema value all the way back to the very start).
I think this is a doc error: The MFI function has no unstable period.
Python test code is here:
https://github.com/mrjbq7/ta-lib/issues/435#issuecomment-868955590
OK, I have showed my point theoretically (in the OP).
Now I just did the following test, it shows (actually proves) The MFI function has no unstable period (up to numeric calculation stability).
import pandas as pd
import numpy as np
def test():
# check RSI vs MFI unstable period.
fn = "SPY.csv"
df = pd.read_csv(fn)
df["ratio" ] = df["Adj Close"] / df["Close"]
df["Open" ] = df["Open" ] * df["ratio"]
df["High" ] = df["High" ] * df["ratio"]
df["Low" ] = df["Low" ] * df["ratio"]
df["Close" ] = df["Close" ] * df["ratio"]
o = np.array(df["Open"])
h = np.array(df["High"])
l = np.array(df["Low"])
c = np.array(df["Close"])
v = np.array(df["Volume"], dtype=np.double)
rsi = []
for n in [40, 50]:
r = talib.RSI(c[-n:])
print(r)
rsi.append(r)
m = 40 - 14
diff = np.abs(rsi[0][-m:] - rsi[1][-m:])
print(np.max(diff), np.mean(diff)) # 2.6424354952679963 1.1047087679412708
mfi = []
for n in [40, 50]:
m = talib.MFI(h[-n:], l[-n:], c[-n:], v[-n:])
print(m)
mfi.append(m)
m = 40 - 14
diff = np.abs(mfi[0][-m:] - mfi[1][-m:])
print(np.max(diff), np.mean(diff)) # 1.4210854715202004e-14 5.738999019600809e-15
assert(np.all(np.isclose(mfi[0][-m:], mfi[1][-m:]))) # pass!
As you can see the rsi diff (max() & mean()) is quite big (because of the EMA kind of memory -- the inherent difference caused by the algorithm); But the the mfi diff is every small (it should all be 0, the diff is caused by numeric computation stability, i.e. rounding error caused by operation sequence.)
You can try this code yourself.
Hey @mingwugmail , I cloned the repo from sourceforge to github to make sure I can add the project as a git submodule. I have no plan to maintain this project however. If you are interested in maintaining this project or if you can reach to the original developer, I'd like to transfer the ownership of the git org.
Thanks for reporting this.
You are correct, although the fix I propose is more complicated than fixing the comment :smile:
A "stable" function must return the exact same value for passing ta-lib automated tests... because I did choose a MFI implementation that introduce some imprecision, I decided to flag it as "unstable".
With that in mind, you are correct that the cause for "instability" is not the same as with, say, RSI.
As you hinted, the MFI implementation subtracts values that were previously added on the same variable, and this introduce a bit of "noise". This is the mind boggling "floating point epsilon" problem. The imprecision is insignificant, but from the test perspective it is not "exactly" stable.
What to do?
I think the real fix would be to re-implement MFI with a different algo that guarantee stability versus prioritizing speed... after all CPU are significantly more faster since this was first implemented :wink:
Once re-implemented, the "unstable" flag could then be turn off.
