Chaikin Oscillator vs Chaikin Money Flow Indicators

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quantum777
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Chaikin Oscillator vs Chaikin Money Flow Indicators

Postby quantum777 » 15 Feb 2018

We have in our MC the Chaikin Oscillator Indicator. The Chaikin Money Flow is not as smooth BUT in low range price moves it is slightly more accurate. An indicator explanation is below and a chart picture is attached.
Per Stockcharts.com
Developed by Marc Chaikin, the Chaikin Oscillator (indicator in our MC)measures the momentum of the Accumulation Distribution Line using the MACD formula. This makes it an indicator of an indicator. The Chaikin Oscillator is the difference between the 3-day EMA of the Accumulation Distribution Line and the 10-day EMA of the Accumulation Distribution Line. Like other momentum indicators, this indicator is designed to anticipate directional changes in the Accumulation Distribution Line by measuring the momentum behind the movements. A momentum change is the first step to a trend change. Anticipating trend changes in the Accumulation Distribution Line can help chartists anticipate trend changes in the underlying security. The Chaikin Oscillator generates signals with crosses above/below the zero line or with bullish/bearish divergences.
Calculating the Accumulation Distribution Line (ADL) is the first step to the Chaikin Oscillator. This article will cover the basic elements of the Accumulation Distribution Line. See our ChartSchool article the details. There are three steps to calculating the Accumulation Distribution Line (ADL). First, calculate the Money Flow Multiplier. Second, multiply this value by volume to find Money Flow Volume. Third, create a running total of Money Flow Volume to form the Accumulation Distribution Line (ADL). Fourth, take the difference between two moving averages to calculate the Chaikin Oscillator.
1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low)
2. Money Flow Volume = Money Flow Multiplier x Volume for the Period
3. ADL = Previous ADL + Current Period's Money Flow Volume
4. Chaikin Oscillator = (3-day EMA of ADL) - (10-day EMA of ADL)
The Accumulation Distribution Line rises when the Money Flow Multiplier is positive and falls when negative. This multiplier is positive when the close is in the upper a half of the period's high-low range and negative when the close is in the lower half. As a MACD type oscillator, the Chaikin Oscillator turns positive when the faster 3-day EMA moves above the slower 10-day EMA. Conversely, the indicator turns negative when the 3-day EMA moves below the 10-day EMA.
Developed by Marc Chaikin, Chaikin Money Flow measures the amount of Money Flow Volume over a specific period. Money Flow Volume forms the basis for the Accumulation Distribution Line. Instead of a cumulative total of Money Flow Volume, Chaikin Money Flow simply sums Money Flow Volume for a specific look-back period, typically 20 or 21 days. The resulting indicator fluctuates above/below the zero line just like an oscillator. Chartists weigh the balance of buying or selling pressure with the absolute level of Chaikin Money Flow. Chartists can also look for crosses above or below the zero line to identify changes on money flow.
There are four steps to calculating Chaikin Money Flow (CMF). The example below is based on 20-periods. First, calculate the Money Flow Multiplier for each period. Second, multiply this value by the period's volume to find Money Flow Volume. Third, sum Money Flow Volume for the 20 periods and divide by the 20-period sum of volume.
1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low)
2. Money Flow Volume = Money Flow Multiplier x Volume for the Period
3. 20-period CMF = 20-period Sum of Money Flow Volume / 20 period Sum of Volume
Each period's Money Flow Volume depends on the Money Flow Multiplier. This multiplier is positive when the close is in the upper a half of the period's high-low range and negative when the close is in the lower half. The multiplier equals 1 when the close equals the high and -1 when the close equals the low. In this way, the multiplier adjusts the amount of volume that ends up in Money Flow Volume. Volume is in effect reduced unless the Money Flow Multiplier is at its extremes (+1 or -1).
Attachments
180215 chaikin money flow vs oscillator.jpg
180215 chaikin money flow vs oscillator.jpg (403.36 KiB) Viewed 303 times

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