Chaikins Money Flow Analysis & Money Flow Trading Signals
Developed by Marc Chaikins
This an oscillator which measure the Accumulation/distribution of money that is flowing into and out of gold.
The technical indicator is based on the fact that the nearer the close price is to the high of the price, the more the accumulation of gold.
Also the nearer the close price is to the low of the price, the more the distribution of gold.
Chaikins Money Flow will be positive if price consistently closes above the bar's midpoint with increasing volume.
However, if market price consistently closes below the bar's mid point with increasing volume the technical indicator will be negative.
XAU/USD Analysis and How to Generate Signals
Buy Trade Signal
A crossover of above zero signifies accumulation of gold. A value of above +10 is a buy/bullish signal. Values above +20 signal a strong upward trending market.
Buy Trade Signal
Sell Trading Signal
A Zero line cross of below zero signifies distribution of gold. A value of below -10 is a short/sell trading signal. Values below -20 signal a strong downwards trending market.
Sell Signal
Gold Trend Line break with Chaikin’s money Flow
The money flow can be used to confirm gold trend line breaks out or support/resistance zone breaks out.
If the price breaks an upward gold trend line, traders should then wait for a confirmation signal from the technical indicator readings of below -10.
Gold TrendLine Break - Sell Trading Signal
If the price breaks an downward gold trend line, traders should then wait for a confirmation signal from technical indicator values of above +10.
Gold TrendLine Break - Buy Signal
Divergence Gold Trading
A divergence between this indicator and price often signals a pending reversal in the market direction. However as with all divergences its best to wait for additional confirmation signals before trading the divergence trade setup.
A bullish divergence signal forms when price makes lower low while the Chaikin Money Flow makes higher low.
A bearish divergence signal occurs when price forms higher high while the Chaikins Money Flow indicator makes lower high.
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