In a simple word, the Chaikin Money Flow indicator draws a line base on buying and selling Pressure.
CMF gives weighted to Volume to draw a line. CMF indicator is the accumulation and distribution measuring indicator.
You may know that Volume Indicator is one of the important indicators. Volume chart indicator history shows you, where more buyers were active buy and where more sellers were active to sell. When more buyers want to buy shares then because of high demand, share price automatically rises, in this case, volume chart indicator bars will Green.
And when more sellers want to sell, because of more supply, the share price will fall. In this case, Volume chart Bars will be Red color. Using the Volume chart indicator, you will find every period buyer & seller activities.
But CMF indicator, draw a historical Line of volume and price actions. so that, you can find the volume base price actions line.
Chaikin Money Flow indicator setting
Go to Indicator section and search for “Chaikin Money Flow”
- Period: by default its 20 periods. this means 20 candle price and volume action will take to calculate the CMF indicator line.
- Result: This is the CMF Indicator Line color.
Chaikin money flow indicator trading strategy
What Chaikin Money Flow Indicator Tells You :
- When a Period’s closing price is high. that means, more buyers want to buy the share compare to sellers.
- When a period’s closing price is low. that means, more sellers want to sell the stock compare to buyers.
When CMF indicator grows upward above the ‘zero’ line this is the Bullish Signal, and you can buy.
When CMF indicator moving downward direction below the ‘zero’ line. this is the bearish Signal. And you can sell.
Above ‘zero’ line is positive side & below the ‘zero’ line is a negative side. sometimes this indicator moving around the ‘zero’ line. to avoid those noise you can enter to stock after crossing +- 0.10 line of this indicator.
- If you are want to buy share then, wait for crossing 0.10 line. After crossing you can buy the stock to reduce the noises of this indicator.
- If you are want to short sell shares then, wait for crossing -0.10 line. After crossing if indicator moving to downside direction then you can short sell to reduce noises of the Chaikin MF indicator.
Chaikin Money Flow indicator is a good indicator. This will help to show volume-weighted buying and selling price actions in the market.
So, When more buying that means share price can rise, & this is the buying signal. when more selling that means share price can fall, & this is the selling signal.
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