Chaikins Money Flow Indices Technical Analysis & 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 stock indices price is to the high of the indices price, the more the accumulation of indices.
Also the nearer the closing stock indices price is to the low of the indices price, the more the distribution of indices.
Chaikins Money Flow will be positive if stock indices price consistently closes above the bar's midpoint with increasing volume.
However, if stock indices price consistently closes below the bar's midpoint with increasing volume the indicator will be negative.
Indices Technical Analysis and 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 indices trend line breaks out or support/resistance level breaks-out.
If stock indices price breaks an upward indices 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 stock indices price breaks an downward indices 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 & stock indices 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 stock indices price makes a lower low while the Chaikins Money Flow makes a higher low.
A bearish divergence signal occurs when stock indices price makes a higher high while the Chaikins Money Flow makes a lower high.
