Chaikin Money Flow Oscillator

Created by Mark Chaikin, the Chaikin money flow (CMF) oscillator is similar to the more widely used Moving Average Convergence Divergence (MACD) indicator because it uses two different exponentially weighted moving averages (EMAs) to analyze momentum.  It is commonly used by active traders to monitor the flow of money and/or momentum.

KEY TAKEAWAYS

• Chaikin money flow oscillator and money flow index are both momentum indicators, but the similarities end there because the ways the indicators are calculated and interpreted are different.
• Chaikin is similar to MACD in that both indicators use exponential moving averages in their calculations.
• When the Chaikin money flow indicator is red, it suggests the market is in a downtrend and when it is green, the indicator suggests an uptrend.
• Money flow index uses volume in combination with recent price movements to determine trends and to determine whether a market is overbought or oversold.

An example of the CMF oscillator in use given below.