Chaikin Money Flow Technical Analysis and Money Flow Trading Signals

Developed by Marc Chaikin

This an oscillator which measure the Accumulation/distribution of money that is flowing into and out of a commodity.

The indicator is based on the fact that the nearer the closing commodities trading price is to the high of the trading price, the more the accumulation of the commodity.

Also the nearer the closing commodities trading price is to the low of the trading price, the more the distribution of the commodity.

Chaikin Money Flow will be positive if commodities price consistently closes above the bar's midpoint with increasing volume.

However, if commodities price consistently closes below the bar's midpoint with increasing volume the indicator will be negative.

Commodity Analysis & Generating Trade Signals

Buy Trade Signal

A crossover of above zero signifies accumulation of a commodity. A value of above +10 is a buy/bullish signal. Values above +20 signify a strong upwards trending market.

Buy Trading Signal

Sell Trading Signal

A Zero line cross of below zero signifies distribution of a commodity. A value of below -10 is a short/sell signal. Values below -20 signify a strong downward trending market.

Sell Trading Signal

Commodities Trend Line break with Chaikin's money Flow

The money flow can be used to confirm trend line breaks out or support/resistance level breaks-out.

If commodities trading price breaks an upward trend line, Commodities traders should then wait for a confirmation signal from the indicator values of below -10.

Trend-Line Break

If commodities trading price breaks an downward trend line, Commodities traders should then wait for a confirmation signal from indicator values of above +10.

Commodities Trend Line Break

Divergence Commodities

A divergence between this indicator and commodities trading price often signals a pending reversal in market direction. However as with all divergences its best to wait for confirmation signals before trading the divergence.

A bullish divergence signal occurs when commodities trading price makes a lower low while the Chaikins Money Flow makes a higher low.

A bearish divergence signal occurs when commodities trading price makes a higher high while the Chaikins Money Flow makes a lower high.