Chaikins Money Flow Analysis and Money Flow Signals
Created and Developed by Marc Chaikins
This an oscillator which measure the Accumulation/distribution of money that's flowing into and out of a currency pair.
The indicator is based on the fact that the nearer the close price is to the high of the price, the more the accumulation of the forex pair.
Also the nearer the close price is to the low of the market price, the more the distribution of the forex currency pair.
Chaikins Money Flow will be positive if the 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 technical indicator will be negative.
FX Analysis and Generating Signals
Buy Signal
A crossover of above zero signifies accumulation of a forex currency pair. A value of above +10 is a buy/bullish signal. Values above +20 signify a strong upwards trending market.
Buy Signal
Sell Trade Signal
A Zero line cross of below zero signifies distribution of a currency pair. A value of below -10 is a short/sell trade signal. Values below -20 signify a strong downwards trending market.
Sell Signal
Trend Line break with Chaikin’s money Flow
The money flow can be used to confirm trendline breaks out or support/resistance level breaks out.
If the price breaks an upwards trend line, traders should then wait out for a confirmation trading signal from the indicator readings of below -10.
Trend-Line Break - Sell Trade Signal
If the price breaks an downward trendline, traders should then wait for a confirmation trading signal from indicator values of above +10.
Trend-Line Break - Buy Trading Signal
Divergence Trading
A divergence between this trading indicator and price often signals a pending reversal in the market direction. However as with all divergence setups its best to wait and chill for a confirmation trading signal before trading the divergence trading setup.
A bullish divergence signal forms when price forms a lower low while the Chaikin's Money Flow makes higher low.
A bearish divergence signal forms when the price makes and forms higher high while the Chaikins Money Flow indicator makes a lower high.
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