Chaikin Money Flow

From Traderpedia

The Chaikin Money Flow was developed by Marc Chaikin and is an oscillator that utilises the Accumulation/Distribution Line to calculate readings. This is done as the Accumulation/Distribution Line defines the degree of buying or selling pressure by its location relative to the high and low for the corresponding session. This is known as the Closing Location Value. It is the Closing Location Value multiplied by volume which forms the Accumulation/Distribution Line for each sesssion.

The oscillator shows that there is buying pressure when a stock/index closes in the upper half of that sessions range. Conversely that there is selling pressure when a stock/index closes in the lower half of the sessions trading.

The Chaikin Money Flow is considered to be bullish when the reading is positive (above 0) and bearish when the reading is negative (below 0).

The number of sessions used to calculate the Chaikin Money Flow can be changed to suit the particular stock or index it is being applied to, however 21 is generally considered to be a good indicator of the buying and selling pressure generated by this oscillator. Using a longer time frame will make the indicator less volatile and a shorter time frame will make it more volatile - however a shorter time frame can be more appropriate for weekly or monthly charts.