Chaikins Money Flow Indices 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 indices.

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

Also the nearer the closing price is to the low of the price, the more the distribution of indices.

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

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

Indices Analysis & How to Generate Trading Signals

Buy Trading Signal

A crossover of above zero signifies accumulation of indices. A value of above +10 is a buy/bullish trading 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 indices. A value of below -10 is a short/sell signal. Values below -20 signify a strong downward trending market.

Sell Trading Signal

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

Indices Trend Line Break - Sell Trading Signal

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

Indices Trend Line Break - Buy Trading Signal

Divergence Stock Indices Trading

A divergence between this indicator & 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 price makes a lower low while the Chaikins Money Flow makes a higher low.

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