Chaikin Money Flow
Type
Other indicator
Short introduction
The Chaikin Money Flow (CMF) by Marc Chaikin is actually a volume indicator. It is intended to determine whether money flows into or out of a share (accumulation/distribution). The original use of shares has meanwhile been extended to foreign exchange and commodities. It is always possible to use this function if transactions for a security are published.
Statement
With his CMF, Marc Chaikin pursued the goal of expanding the "On Balance Volume" indicator by setting the daily closing prices in relation to the trading volume. To do this, the sales are multiplied by the prices. The indicator thus indicates whether the price trend is influenced by accumulation (buying pressure) or distribution (selling pressure).
Formula/calculation
ADt = (((Ct - Lt) - (Ht - Ct)) ÷ (Ht - Lt)) × Vt
CMFt = Σ ADt-i ÷ Σ Vt-i
the sums run between i = 0 and i < n
Interpretation
The CMF is displayed in its own chart and oscillates around the zero line. The scale is open in both directions, which opens up the possibility of unlimited accumulation and distribution. Above the zero line, the security is in demand, below it it is being sold. The CMF is usually displayed in green in the positive area and red in the negative area. Every time a Chaikin Money Flow forms higher highs or lower lows, buying or selling pressure increases significantly, which is more important than the same chart patterns in the security price.
Default setting
- Period n =14 or 21 days