CHAIKIN MONEY FLOW OSCILLATOR (CMF)
Chaikin Money Flow (CMF) oscillator is derived from Accumulation / Distribution
indicator.
Accumulation / Distribution indicator is indicates change of price with volume
that reflects flow of money.
Description :
Chaikin Money Flow oscillator (CMF) is the
cumulative total of the Accumulation / Distribution values for
particular time frame divided by the cumulative total of volume for
defined time frame.
Chaikin Money Flow oscillator (CMF) gives buy
signal when value is positive and sell signal when value is
negative.
How to Calculate?
1) Calculate On Balance Volume (OBV)
2) Calculate Close location Value (CV)
CV = [(Close-Low)-(High-Close)] / ( High – Low)
3) Calculate cumulative total (Say CVT) of CV for defined time frame
4) Multiply CVT with today’s volume, say CVVT
5) Calculate CMF
CMF = CVVT / OBV
Divergence in the Chaikin Money Flow oscillator (CMF): A lower peak in the Chaikin Money Flow oscillator (CMF) against higher highs in the stock market
called negative divergence and typically it's a
Sell signal.
A higher peak in the Chaikin Money Flow oscillator (CMF) against lower lows in the stock market
called positive divergence and typically it's a
Buy signal.
To get good result with Chaikin Money Flow (CMF) we need to use it with
other technical indicators like
Moving Average (MA)
|
On Balance Volume (OBV)
|
Percentage Price Oscillators (PPO)
|
Price Rate Of Change (ROC)
|
Relative Strength Index (RSI)
|
Stochastic Oscillator (STO)
|
Commodity Channel Index (CCI).
When we use two or three technical indicators and in case of positive divergence and negative divergence it giving real good result, only you need to change time span and find out which is a better pair for you.