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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

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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.



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