Chaikin Indicator

Trading With The Chaikin Indicator

The Chaikin indicator (Chaikin Money Flow Indicator) was created by Marc Chaikin to calculate the amount of money that is flowing into or out of a currency or security. The main purpose for Chaikin creating the Money flow (CMF) was so he had an oscillating indicator to use with his previous cumulative indicator, Accumulation and Distribution. The calculations are generally over a 20 or 21 day period with the indicator often fluctuating above or below the zero line in the same way an oscillator fluctuates.

Realize Real Time Buying And Selling Pressure With The Chaikin Indicator

From this point, many chartists look at the pressure of buying or selling and weigh that against the absolute level of the CMF. To identify changes in money flow, they will also look out for any crosses above or below the zero line.  There are many different settings that you can customize once getting familiar with this indicator that will allow you to sharpen or losen the reporting of that particular trading signal.

Chaikin Indicator Shown On Chart Below

As shown in the trading chart below, the Chaikin Indicator is a great tool when utilized correctly.  Take notice of the buy and sell signals clearly pointed out below, this is an indication of a change in overall direction in the price of the security.  By using the Chaikin Indicator you can correctly time entry and exit positions easily by taking notice to the positive and negative swings in money flow.  This particular indicator is a reliable tool that most swing traders and long term traders will utilize to define longer term swings and trends.  Like any other indicator there are false positives such as the one shown below in between the buy and sell signal, this is why it is important to ensure that the trend is confirmed and not just rising or dropping below the desired signal momentarily only to rise back up or below that particular signal on the Chaikin Indicator.

Chaikin Indicator