Chaikin Money Flow

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The indicator uses volume to determine the market trend. The indicator provides a notification system (on the chart, via SMS and email) when a certain level is crossed.

The Chaikin Money Flow indicator (CMF), developed by Mark Chaikin, measures the amount of money Flow Volume (MFV) for a certain period. The amount of cash flow is the basis of the accumulation/distribution line. Instead of the total value of the volume of cash flow, Chaikin Money Flow simply summarizes this volume for a certain historical period. The resulting indicator fluctuates above/below the zero line, like an oscillator.

Money Flow Multiplier (MFM)= ((CLOSE(i)-LOW (i))-(HIGH (i)-CLOSE(i))) / (HIGH (i)-LOW(i))

MFV(i)= MFM(i) * VOLUME(i)

CMF(n)= sum(MFV, n) / sum(Vol, n)

Money Flow Multiplier (MFM)= ((CLOSE(i)-LOW (i))-(HIGH (i)-CLOSE(i))) / (HIGH (i)-LOW(i))

MFV(i)= MFM(i) * VOLUME(i)

The amount of cash flow for each period is determined by this multiplier. The multiplier has a positive value if the closing price is at the top of the range of the period, and a negative value in the opposite case. The multiplier is 1 if the closing price is High, and -1 if the closing price is Low. Thus, the multiplier regulates the amount of cash flow. In fact, the volume decreases, except when the cash flow multiplier is at one of its extremes ( 1 or -1).

CMF provides three types of typical signals:

Chaikin recommended the value of n=21 and claimed the following…

• Values between 0 and 0.10 (-0.10) indicate a weak bullish (bearish) trend.
• Values > 0.25 (<-0.25) indicate a strong bullish (bearish) trend.

• Period calc – the number of bars to calculate.
• EMA signal – smoothed signal line of the EMA.
• Alert level – the level at which an audible warning is played, an email or an SMS message is sent.
• Alert mode – NoW = no alert (only on the chart), Email, SMS, AllW= Email and SMS.
• Volume type: VOLUME_TICK / VOLUME_REAL.

The user determines the level, for example, 0.1. If it is exceeded, a warning message appears on the screen. The user can also choose to be notified via email or SMS when using MetaTrader 5.

Chaikin Money Flow can be used to determine the overall buying and selling trends in the market by observing the positive and negative values of the indicator. The indicator fluctuates above / below zero. As a rule, the tendency to buy prevails at positive values of the indicator, and to sell – at negative values.

Despite the simplicity of this pattern, the reality is usually not so clear. Sometimes the indicator crosses the zero line very briefly, giving false signals. The accuracy of the signals can be improved by setting the bullish threshold slightly above zero ( .05) and the bearish threshold slightly below (–.05). These levels can not completely eliminate the appearance of false signals, but they reduce their number and filter out weaker signals.

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