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Chaikin Money Flow

Developed by Marc Chaikin, the Chaikin Money Flow is an oscillator calculated based on the daily readings of the accumulation / distribution line. As with the A / D line, even with the Chaikin oscillator the pressure from buyers and sellers is determined based on the position of the closure with respect to the maximum and minimum. Indeed, there is positive pressure, or accumulation, if the closure is in 50% of the positive range; instead there is negative pressure, or distribution, if the closure is in 50% of the negative range. Generally speaking, Chaikin Money Flow is bullish when it is positive and bearish when it is negative. The CMF generates upward signals indicating that a financial instrument is accumulating on the basis of three factors:

The first and most obvious factor is whether the value of the Chaikin Money Flow value is greater than zero. This is a purchase indication when the indicator is positive.

The second factor is the duration of the reading, how long the oscillator has been positive. The more time the oscillator remains above zero, the more proof there is that the financial instrument is undergoing sustained accumulation. Long periods of accumulation or buying pressure are bullish, and indicate that sentiment towards the financial instrument remains positive.

The third factor is the intensity of the oscillator. Not only should the oscillator stay above zero, but it should also be able to increase and reach a certain level. The more positive the reading is, the more evidence of purchase and accumulation pressure there is.