Marc Chaikin developed the Chaikin Money Flow CMF to combine price and volume information into one indicator. It was developed based on the belief that price follows volume. The indicator fluctuates above and below zero, highlighting whether the stock is in a bullish or bearish phase. To use the CMF effectively, traders should understand how the indicator works, its applications, as well as its strengths and weaknesses. CMF incorporates both price and volume and into one indicator. Traditionally, it is used on daily charts over a period time frame, which is approximately one month in trading days. When prices are closing in the upper portion indicator the day the indicator moves higher; when prices are closing in the lower portion of the day the indicator moves lower. Sustained buying—or closes in the upper portion of the daily range—will push the indicator above zero 0. Sustained selling—closes in the lower portion of the daily range—will push the indicator below zero 0. Volume is also factored though, so each day is multiplied by its volume. Therefore, an up day on high volume will result in a bigger jump in the indicator than an up day on low volume. When the indicator fluctuates around zero it means the stock has little trend, and buyers and sellers are evenly matched. When the indicator stays above zero for a sustained period of time, especially with increasing indicator values, it shows a strong uptrend. If the indicator is below zero for a sustained period of time, and indicator values are decreasing, it shows money strong downtrend. Many trading platforms and charting sites divide the CMF bymaking it a decimal. For example, some platforms flow show readings of 28, or -5, and others will show it as 0. The CMF is available on most trading platforms, such as ThinkorSwimand a number of free online charting sites including FreeStockCharts. The CMF indicator indicator used primarily as a confirmation tool, and therefore can be combined with other indicators or chart patterns to find trade signals. One method is to apply a moving average to the chart, and capture trend trades. Another method is to use the CMF to confirm breakouts. With both the flow, the number of days used in the CMF calculation can be altered to suit individual trader needs. The day indicator is for short-term or swing traders. A six month or day time period forex be used by traders looking to catch intermediate trends and trades lasting several months. A 12 month Moneyor trading days, will show the long-term accumulation or distribution of a stock. Be sure to also read our Ultimate Guide to the MACD Indicator. For the breakout method, establish areas of support or resistance which the price has struggled to surpass on multiple attempts. When price moves above the resistance level make sure that the CMF is above zero. If it is, proceed with buying the resistance breakout. When the price moves below a support level, note if the CMF is below zero. If it is, proceed with short-selling the support breakout. Multiple CMF time forex can be used to further confirm the breakout. Figure 2 uses an period CMFwhich is approximately four months. It is above zero when the breakout occurs. You could also check a period CMFor a period CMF six months to see if they are also above zero. If they are all above zero it shows accumulation of the stock over both the shorter- and longer-term, and further confirms the breakout. A stop loss can be placed just below the old resistance level in the case of a resistance breakout upsidechaikin just above support in the case of a support downside breakout. Profit targets can be used for an exitor alternatively, hold long trades until the CMF turns negative. Hold short trades until the CMF turns positive. Since this strategy involves buying when the price is falling, a fixed stop will be hard to implement. Instead place a stop based on a percentage of flow. For more volatile, stocks increase the percentage leeway; for more stable stocks, decrease the percentage leeway. Forex targets can be used for exits, or use the CMF: CMF is predominantly a confirmation tool, helping establish the strength of a trend that can aid in trade selection. The trader is responsible for implementing a stop loss and finding a profitable exit based on a strategy, or attempting to interpret the information the CMF is producing. Very high or low data values will have a large impact on the indicator. This can skew the indicator reading, and sometimes even make it useless. The large impact is seen on the day the data is first calculated into the indicator, and the day the data drops off from being included in the calculation. Marc Chaikin is the founder of the CMFand discusses it on his site http: He is founder of Chaikin Analytics, which helps investors via an array of market indicator and professional quality research reports. He has more than 40 years of market experience, is a stock market lecturer and appears regularly on CNBCFox Business News and Bloomberg. The CMF showcases price and volume information in one indicator. Rising indicator values show the stock is being accumulated, while a falling indicator value shows the stock is being distributed. Profit targets can be used, or exit trades when the CMF turns negative on long trades or positive on short trades. No indicator works all the time, and the CMF may be skewed by days with very high or low data values. Active traders can use this list to find potential candidates and screen for the most attractive Are you looking for stocks that are showing signs of bottoming out? Here is a look at some of the Is your portfolio starving for dividends? Here is a look at the highest yielding securities in Enter your e-mail address to subscribe. Low Volatility ETFs invest in securities with low volatility characteristics. Chaikin funds tend to have relatively stable share prices, and higher than average yields. Investors who suspect that the stock market may be about to decline can take action to reduce the Thank you for selecting your broker. Please help us personalize your experience. Your personalized experience is almost ready. Join other Individual Investors receiving FREE personalized market updates and research. Join other Institutional Investors receiving FREE personalized market updates and research. Join other Financial Advisors receiving FREE personalized market updates and research. Check your email and confirm your subscription to complete your personalized experience. Thank you for your submission, we hope you enjoy your experience. 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Python: Chaikin Money Flow Trading Indicator 1
Python: Chaikin Money Flow Trading Indicator 1
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