CMF Indicator (Chaikin Money Flow):
This indicator incorporates the volume to inform the market trend.
Provides three types of typical signals:
Author: Jose Miguel Soriano Trujillo
Forum on trading, automated trading systems and testing trading strategies
Indicators: Chaikin Oscillator (CHO)
newdigital, 2013.09.03 13:45
newdigital, 2013.09.03 14:06
The Chaikin Oscillator or Volume Accumulation Oscillator consists of the
difference between two exponential moving averages (usually 3 and 10-day) of the
Accumulation Distribution Line indicator and is used to confirm price movement
or divergences in price movement. The Chaikin Oscillator is more accurate than
the On Balance Volume indicator.
The main purpose of the Chaikin Oscillator is to confirm price trends and
warn of impending price reversals. The chart below of the Nasdaq 100 ETF QQQQ
illustrates these confirmation signals and divergence signals:
The Nasdaq 100 ETF QQQQ made higher highs, usually a bullish sign. However,
the Chaikin Oscillator failed to mirror the QQQQ's advance higher and ended up
making a lower low. This bearish divergence forewarned of the impending price
The QQQQ's made a significantly lower high. The Chaikin Oscillator confirmed
the QQQQ's downtrend by making a lower high as well.
The Nasdaq 100 made significant lower lows, yet the Chaikin Oscillator made
higher lows. This bullish divergence signaled that the previous downtrend may